- Municipality Constrain Under Growth Opportunity Act
With the Growth Prospect Act, the federal administration aims to provide aid to businesses – a news piece suggests it might result in decreased earnings for municipalities.
In Hanover, treasurer Axel von der Ohe anticipates a budget shortfall of several hundred million dollars commencing in 2027, as reported by the "Hannoversche Allgemeine Zeitung" (Friday). "The development package of the traffic light parties mustn't transform into a debt package for cities and districts," he told the newspaper.
Billions in reliefs are proposed
The federal government envisions enhancements in depreciation tax breaks and an increase in research allowances through this legislation. These reliefs are an aspect of tax legislation. The Growth Prospect Act, following a mediation process between the Bundesrat and the Bundestag, wound up being smaller in scope than planned – instead of yearly reliefs of seven billion euros, around three billion euros materialized.
Lately, Hanover's state capital presented a balanced budget for the years 2025 and 2026. The dual budget proposal has a value of 3.19 billion euros for 2025 and 3.3 billion euros for 2026.
Significant losses forecasted
According to the article, cities and municipalities may incur losses, primarily in business tax revenues, the primary income source for municipalities, and income from income tax. If the act is enacted, the Hanover treasury predicts a reduction in income tax revenues by 10 million euros as early as the next year, which has already been accounted for in the latest budget.
The losses could be more substantial for business tax revenues, for instance, due to new depreciation choices for enterprises. The reductions in revenues remain uncertain.
Staff council voices concern
The collective staff council of the city of Hanover also expressed concerns over the potential revenue losses. "The political parties in Berlin can hardly manage their own budget and then pass the burden onto the weakest, the municipalities," said Thomas Schremmer, chairman of the overall staff council, to the newspaper. "That's simply appalling and will only lead to further discontent."
With the implementation of the Growth Prospect Act, municipalities like Hanover might face decreased revenues due to potential losses in business tax revenues and income tax. Axel von der Ohe, Hanover's treasurer, foresees a budget shortfall for his municipality starting in 2027.
