A German Finance Ministry panel of academics has drawn up a proposal for a flat rate of income and corporate tax in a bid to boost investment activity in Europe’s largest economy.
The proposal calls for a 30% flat rate of tax on all personal and corporate income with the resulting shortfall in revenues to be offset with a 2% rise in Germany’s 16% sales tax, Wolfgang Wiegard, a member of the panel and head of the government’s five-member council of economic advisors, told Bloomberg.
Under the plan, tax-free allowances would also rise “substantially” whilst further sources of revenue could be found from reductions in tax breaks and subsidies.
Alternatively, the 29 member panel have tabled a ‘dual tax system’ whereby personal income tax would remain subject to tax on a progressively sliding scale and other forms of income, such as company profits, rents, interest, share sales and dividends, would be subject to a flat rate of tax.
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