The German government's corporate tax reform bill won the backing of the Bundesrat upper house of parliament today, clearing its final parliamentary hurdle.
The measure aims to attract business to Germany and support growth in Europe's largest economy. It must be signed off by President Horst Koehler before it takes effect next year.
The reform, which will cut incorporated companies' tax burden to just under 30 per cent from 39 per cent from 2008, is a major plank of the economic policies Chancellor Angela Merkel's ruling coalition agreed before assuming power in November 2005.
"This corporate tax reform is an investment in and for Germany," Finance Minister Peer Steinbrueck told the Bundesrat. "It will be a support for the economic cycle, for growth development in 2008."
The measure envisages €30 billion ($40.8 billion) worth of tax cuts, €25 billion of which will be financed by widening the tax base and increasing incentives for firms to file their taxes in Germany rather than other countries.
The reform will widen the tax base by reducing firms' ability to deduct interest payments from profits - a proposal resisted by business leaders and some conservatives.