The German cabinet has approved a number of revenue raising measures designed to trim the country's budget deficit in line with European Union fiscal rules, including a new 'wealth tax' on high income taxpayers, although the controversial measure will not be applied to private business owners.
Under a deal struck by members of the left/right coalition last month, individuals earning more than EUR250,000 a year (US$316,000), and couples earning more than EUR500,000 a year will face a 3% tax increase from 2008 as the top rate of income tax rises to 45%.
Importantly, the government has decided not to apply the measure to family-owned companies, which are often taxed under the income tax system, so as not to burden small firms with additional taxes and snuff out Germany's fragile economic recovery. The coalition government has also pledged to reform the business tax system by 2008.
Self-employed professionals such as doctors and lawyers will also be exempt from the tax hike.
The wealth tax is expected to generate about EUR127 million annually in additional revenues.
The same legislation will also cut tax breaks for commuters by barring employees from writing off the cost of the first 20 kilometers of their journey. Another measure will cut the tax-free threshold on interest earned on savings to EUR750 annually for single people from the current EUR1,370.
The Finance Ministry estimated that the total tax package will raise almost EUR18 billion between 2007 and 2010.
"The fast and permanent reorganization of public finances is at the top of the tax policy agenda," a ministry statement declared.
If approved by parliament, the new law would coincide with a 3% increase in value added tax to 19% on January 1, 2007.
Germany's tax policy is currently steered towards cutting the government's deficit to below the Eurozone limit of 3% of gross domestic product.
The European Commission this week projected Germany's budget shortfall will narrow to 2.5% of GDP next year from 3.1% in 2006.
.
Network Tweets
Network BlogsContent
provided by
|
Archive | Resources | Partners | Site Map | Links | Newsletter Archive | Contact | RSS Feeds | About | Syndication | Advertising & Marketing | Recruitment | Terms & Conditions | Privacy & Cookies
Copyright © 2012 - All Rights Reserved - Tax-News.com
IMPORTANT NOTICE: Tax-News.com has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments.
Write a comment