Impacts of Tax Changes and Budget Cuts on German Agriculture Since 1999 the Federal Government has introduced a number of measures in taxation and reducing the subsidies for social policy in agriculture. Farms will also be affected by the planned tax reform aiming at a significant reduction of income taxes for companies organised as legal persons. A simulation model is used to assess impacts of these measures on farm income. Due to progressive and digressive effects of taxation the calculations were realised on the base of farm accounting data for individual farms. The results are further aggregated to farm types and size classes as well as to the sector level. Negative income effects are induced in the majority of farms. Especially farms with low incomes in the base situation are affected because they are not much favoured by lower income taxes. On the other side, investments will be negatively affected by further less favourable conditions in accounting depreciations. The capability to increase farm size via investments will be reduced.
