German government backtracks on tax hikes for farmers following protests

German government backtracks on tax hikes for farmers following protests

Germany's three-party ruling coalition on Thursday partly backed down from a proposal to cut tax privileges for farmers after facing emotional protests.

The government said in a statement that it would gradually phase out tax breaks on diesel fuel for farmers over multiple years rather than cut the benefit abruptly as coalition leaders had initially proposed, in order to “give the affected companies more time to adjust." The government also said it would waive planned tax increases for agricultural vehicles.

The leaders of Chancellor Olaf Scholz's coalition had previously announced the tax hikes on farmers as part of a draft budget deal for 2024 presented last month. The planned increases were part of the coalition’s attempts to plug a multi-billion-euro budget gap that appeared after the country’s top court ruled that some of its spending practices were unlawful.

In response to the coalition’s proposal, farmers organized a major protest in Berlin in which a convoy of 1,700 tractors blocked the main road leading to the Brandenburg Gate. Farmers have also planned nationwide protests for next week.

The coalition climbdown is unlikely to appease the protesters.

"This can only be a first step,” said Joachim Rukwied, president of the German Farmers' Association. “Our position remains unchanged: Both proposals for cuts must be taken off the table. This is clearly also about the future viability of our industry and the question of whether domestic food production is still desirable at all."

As the ruling coalition struggles to finalize a budget for 2024, the continued resistance of farmers illustrates how difficult it will be for party leaders to agree budget cuts without political repercussions.

The government said it plans to compensate for the latest change to its budget plan partly by using revenue from offshore wind tenders.