The Union has threatened the Social Democratic Party (SPD) with blocking the tax reform unless certain conditions are met. Mathias Middelberg, the deputy chairman of the Union parliamentary group, told Handelsblatt, that the income tax reform cannot be approved without a truly viable model that allows partnerships to switch to corporate taxation.
As part of the reform program, the Union and the SPD had previously agreed on a tax overhaul, which included raising the tax rate for the wealthy from 45 percent to 47 percent. Simultaneously, the coalition had already decided on a step-by-step reduction of the corporate tax from 15 percent down to 10 percent. Through these two reforms, the tax burden on businesses would eventually diverge by seven percentage points, depending on their legal structure.
However, Middelberg stated that such a broad disparity in taxation based on a company’s legal form is unacceptable. The Union and SPD had agreed that the so-called options model needed to be made more practical, allowing partnerships to shift from income tax to corporate tax. The coalition agreement from early July stated that the federal government would present an “improvement of the options model” by Autumn 2026. Nevertheless, Middelberg criticized that no such proposal has been submitted yet. He concluded that without a practical options model, their party cannot, in his view, agree to the planned tax increase.
