The German government's measures are addressing many of the right issues. Relief for families and employees through higher tax allowances, child benefits, and adjustments to the income tax scale strengthens purchasing power. This could have a stabilizing effect on the domestic economy, from which many craft businesses also indirectly benefit, says Jörg Dittrich. (Photo: © ronniechua/123RF.com)
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July 2026
The governing parties agreed on comprehensive reforms in the coalition committee. The skilled trades sector believes that the legislature is addressing many of the right issues with these reforms.
The CDU, CSU, and SPD have reached an agreement in the coalition committee on a major reform package. This includes pension system reform, tax reform, and measures to reduce bureaucracy. "The agreement reached by the coalition committee shows that the governing coalition is capable of taking action and compromise, even on difficult issues. Given the economic situation, this is a crucial and very important message," explains Jörg Dittrch, President of the Central Association of German Crafts"A compromise naturally means that not all expectations will be met. This also applies to craftsmanship."
The Federal government However, their measures address many of the right issues. Relief for families and employees through higher tax allowances, child benefits, and adjustments to the income tax scale strengthens purchasing power. This could have a stabilizing effect on the domestic economy, from which many craft businesses also indirectly benefit. The decision not to increase inheritance tax and the top tax rate prevents an additional tax burden, especially for partnerships and sole proprietorships.
Reform packageRead more about the Reforms decided by the coalition committee.Dittrich: "For up to 76 percent of craft businesses in Germany, this is an important message of reliability. The relatively small amount of relief for businesses and employees was chosen in consideration of the discussed counter-financing proposals, particularly with regard to an increase in inheritance tax and a massive increase in the top and wealth tax rates, in the interest of the skilled trades." Maintaining the skilled trades bonus is also important. The planned reduction is an acceptable compromise.
The planned reduction of unnecessary bureaucracy has the potential to significantly reduce administrative burdens in businesses, thereby freeing up capacity for training, order processing, and investment. "The proposed labor market policy adjustments, such as greater flexibility regarding fixed-term contracts, the abolition of sick leave certificates issued over the phone, and measures to improve the enforcement of social welfare regulations, address demands that the skilled trades have long advocated. Additionally, the extended Sunday opening hours for bakeries and confectioneries add a sector-specific dimension."
Craft policy
Craft policy
Craft policy
Dittrich, however, criticizes the lack of tax relief for sole proprietorships analogous to the reduction in corporate tax. "This should have been achieved through a reduction of the solidarity surcharge for income taxpayers and improved tax benefits for retained earnings. There is a need for improvement here within the framework of the announced tax simplification law." He also finds it negative that the flexibilization of working hours is still pending. More modern working time regulations would have been particularly important for skilled trades to better meet operational demands.
The construction industry views the decisions as an important signal for the economy. "For the construction industry, reducing bureaucracy, faster permitting, and a more flexible labor market are crucial prerequisites for increased investment and growth. It is regrettable, however, that the announced flexibilization of working hours was not included in the agreement. Further action is needed regarding taxes and levies," says Felix Pakleppa, Managing Director of the German Association of the Construction Industry (DVK). Central Association of the German Construction IndustryThe burden on companies and employees remains high.
Additional impetus is also needed for housing construction. The decision to prohibit the expropriation of private housing stock at the state level through federal law is welcome. Pakleppa: "This creates legal certainty and strengthens the confidence of private investors. While a state-owned housing company can provide support, it will not solve the existing challenges alone. Over 80 percent of housing construction is carried out by private construction companies. Therefore, the framework conditions must be improved, primarily with faster permits, less bureaucracy, and reliable funding."
The reduction of the skilled trades bonus is a bitter pill to swallow. "It sends a negative signal for investments in renovation, modernization, and housing construction, and it affects an area of particular importance to the construction industry," said Pakleppa. However, it is inherent in the nature of compromise that it cannot satisfy all expectations. "The swift agreement reached by the coalition leaders on a program for economic recovery and employment is a positive sign. Important economic policy initiatives were agreed upon in a short time. Now it is crucial to implement the announced measures quickly and consistently."
Also the Central Association of the German Bakery Trade The German Bakers' Association sees the federal government's plans as providing positive impetus for Germany as a business location. Many of the bakers' demands have been met. "Especially regarding reducing bureaucracy, modernizing data protection law, and strengthening competitiveness, important signals are being sent," explains Roland Ermer, President of the Association. "The decisions show that the coalition has recognized the challenges facing small and medium-sized enterprises (SMEs) and the skilled trades."
The baking trade welcomes the announced abolition of numerous reporting and documentation obligations, as well as the introduction of a "reporting obligation brake." The association also welcomes the planned relaxations in data protection law for small and medium-sized enterprises and the reduction of company data protection officer obligations. Furthermore, the planned implementation of the longer Sunday working hours for bakeries and confectioneries, agreed upon in the coalition agreement and scheduled for January 1, 2027, is viewed positively.
"We expressly welcome the fact that the coalition is sticking to its commitment, provided that the implementation is carried out exactly as agreed in the coalition agreement," said Ermer. The association, however, is critical of the planned changes to mini-jobs. The increase in the flat tax rate from two to five percent will place an additional burden on businesses. Furthermore, should the reform lead to the proven mini-job model becoming less attractive, this would be particularly problematic for bakeries with a high proportion of café customers. Many businesses rely on mini-jobbers to cover peak staffing levels in sales and café areas.
This could further exacerbate the already strained staffing situation. Therefore, the Central Association is calling for a careful examination of the reform's impact and the implementation of practical solutions. The bakers' association intends to wait and see how the pension commission's recommendations are implemented. While a sustainable long-term pension system is essential, it is crucial that the reforms do not place an additional burden on labor-intensive craft businesses and that the competitiveness of small and medium-sized enterprises (SMEs) is maintained.
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