German Cabinet approves €10 billion income tax relief plan

The German Cabinet on Wednesday approved plans for an income tax reform that is expected to provide €10 billion ($11.5 billion) in annual relief from 2028.

The proposal by Finance Minister Lars Klingbeil is aimed at benefiting low- and middle-income earners and families with children.

The reform includes raising the tax-free allowance - meaning the level of income at which people begin paying income tax.

The threshold for Germany's top income tax rate of 42% would also be raised slightly, with the rate applying to taxable income from €70,600.

Child benefit payments and the standard allowance for work-related expenses are also set to increase.

Responding to criticism over the scale of the relief, Klingbeil said: "With our reform, families with children can have over €600 a year more in their pockets from 2028 than they do today. No one should play that down."

The bill will now go to the Bundestag, Germany's lower house of parliament, and the Bundesrat, which represents the country's 16 states, for further consideration.

The coalition plans for the reform to take effect on January 1, 2027.