German Chancellor Olaf Scholz, center, German Economy and Climate Minister Robert Habeck, right, and German Finance Minister Christian Lindner, left, attend a news conference during a closed cabinet meeting at the government s guesthouse Meseberg in Gransee, north of Berlin, Germany, Tuesday, Aug. 29, 2023. AP
The package would ease the burden on "small and medium-sized enterprises by around seven billion euros ($7.6 billion) per year", the government said in a statement.
While coalition parties have haggled over the extent of the tax cuts, Germany's economy has flatlined.
Europe's largest economy recorded flat growth in the second quarter of 2023, having dipped into recession around the turn of the year.
The slowdown has come as Germany struggled to cope with the impact of the Russian invasion of Ukraine, which sent prices for energy and food soaring.
The sluggish growth figures were the reason for the German government to go on the "offensive", Scholz said at a press conference on the first day of a ministerial retreat outside Berlin.
The tax cuts, part of a 10-point plan, were intended to "stimulate growth for our country" and make sure companies made the decision to invest in Germany, Scholz said.
Among the measures agreed were a premium for energy-saving investments, and rule changes to make it easier for companies to write off losses.
Recent disappointing data have added to concerns that Germany will drag down the eurozone's economic performance this year, with the International Monetary Fund (IMF) predicting it will be the only major advanced economy to shrink in 2023.
Germany's key industrial sector, traditionally a driver of growth, has been hit particularly hard in recent months as exports have plummeted against a backdrop of high inflation and subdued global activity.