CDU Mulls Tax Rise To Fund Health

by Ulrika Lomas, Tax-News.com, Brussels

28 May 2010

Given the rising health insurance deficit in Germany, and the initial collapse of the proposed new health care levy, politicians from the ruling Christian Democratic Union (CDU) party have called for urgent action, advocating a rise in taxes in return for a reduction in health insurance contributions.

All too aware of the pressing need to source alternative means of financing health insurance in Germany, parliamentary health committee member Rolf Koschorrek (CDU) put forward the idea of increasing taxes while at the same time reducing health insurance contributions.

Koschorrek maintained that health insurance should be financed more by taxes and less by payroll contributions, thereby reducing the fiscal burden on low- and middle-income earners. As a counter measure, income or value-added tax must rise, he added.

Justifying his proposal, and underlining the need for urgent action, Koschorrek alluded to the fact that the health insurance deficit could be as much as EUR10bn next year. Savings alone will not suffice, he warned.

Fellow party member and parliamentary health care spokesman Jens Spahn (CDU) recently put forward similar proposals, in an attempt to radically reduce social contributions and replace them with higher taxes at the top.

Health Minister Rösler had intended to put forward his proposals for a standard health care levy only very recently but was prevented from doing so by Chancellor Angela Merkel (CDU). Rösler must now wait until a cabinet meeting is held at the beginning of June, before discovering how much money is available for his reform.

Under the current proposal, a standard legal health insurance contribution would be imposed on all individuals in Germany, irrespective of their earnings. But to redress the obvious social imbalance, a subsidy would be provided from state tax revenue.

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