GBP Monitor November: Companies Are Skeptical About the Investment-Promotion Effect of the Growth Opportunities Act

The Growth Opportunities Act, which is about to be passed, aims to promote investments in Germany and to counteract economic crises. But can the planned measures deliver what they promise? The new study of the German Business Panel shows that many companies are skeptical about that. Less than 20 percent of the companies in the survey said that the planned measures would lead to early or more investments in their own company. The vast majority does not expect positive effects for their own investments or does not know the measures.

In August, the government draft of the Growth Opportunities Act was adopted. The law was expected from many for a long time. Currently, the government draft of the law is discussed and revised in the Bundestag’s committees and working groups before the Bundestag will decide on its adoption on 17 November 2023. The new study of the German Business Panel (GPB Monitor) could provide valuable information for the revision. To assess if the proposed measures actually lead to more investments, it is important to include the companies’ perspectives. Researchers of Paderborn University, Humboldt-University zu Berlin, and the team of the German Business Panel (University of Mannheim) have asked companies in Germany how five of the proposed tax measures affect their investments.

The surprising result: On average, only about 13.5 percent of the companies see the tax measures as an incentive to invest earlier or to invest more. Better depreciation opportunities and the investment bonus for climate and environmental measures received the most support (about 17 percent). The extended loss carryback (9.1 percent) and, above all, tax incentives for research (7.6 percent) are only for a few companies an incentive to invest more or invest earlier.

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