What is direct and indirect subsidy

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subsidy

Subsidies are one-sided financial support measures of the state in favor of the economy that are not linked to direct consideration. They serve to promote the economy.

A distinction is made between financial aid (direct subsidies; e.g. subsidies) and tax breaks (indirect subsidies; e.g. reduced tax rate, tax exemption). The local authority granting the subsidy is called the grantor, the company benefiting from the subsidy is called the subsidy recipient. The granting of subsidies can be tied to certain requirements (e.g. environmental requirements).

The following goals can be pursued with subsidies, for example:
- Promotion of economic behavior (e.g. start-up help when setting up a company)
- Mitigation of social hardship in certain branches of the economy (e.g. subsidies for the
Coal mining)
- Support with adjustments to a changed economic environment (e.g. help with dismantling
high capacities)
- Compensation for regional disadvantages (e.g. aid for the new federal states)
- Promotion of productivity gains (e.g. subsidies for the development of new
Production methods)

The granting of subsidies is regularly criticized. For example, it is pointed out that subsidies delay economic structural change processes and create dependencies. Economic misallocations can also occur.

The federal government has to submit a subsidy report every two years.

Payments from the state to households are not referred to as subsidies. In this context, we are talking about transfer payments.

See also:
- Quotes on the subject of "subsidies"
- Available data on subsidies from the German state
- Federal government subsidy reports