Furore Over German Anti-Terrorist Tax Increases Continues

by Ulrika Lomas, Tax-News.com, Brussels

24 September 2001

As reported here last week, German opposition politicians of all stripes were furious that the government decided to increase tax on cigarettes and non-life insurance in order to finance tougher measures against terrorism, money laundering, and tax evasion, without first consulting parliament.

However, the plot thickened recently, as it was revealed that the Christian Democratic Union, the Christian Social Union, and the Free Democratic Party were not the only ones to have been kept in the dark - most members of the government coalition were also not informed until the cabinet meeting was well underway.

Opposition leaders have protested that the way in which the government went about the introduction of the proposals, which will put 4 euros on a carton of 200 cigarettes and add 1% to the tax on non-life insurance, was underhand, and shows that they had no interest in achieving cross party consensus.

Whether the other party which makes up the ruling coalition, namely Alliance 90/The Greens, agrees with this in private has not been established, but the fact remains that when presented with a fait accompli to rubberstamp, rubberstamp it they did. The government has defended the introduction of the measures, which will bring in an additional DM3 billion ($1.42 billion) in revenue, saying that the decision had to be made by a small group (consisting solely of Social Democrats, interestingly enough) in order to ensure 'a calm decision-making environment'. Both taxes will come into effect as of January 2002.

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