German Chancellor Concedes On Tax Reform Debate

by Ulrika Lomas, Tax-News.com, Brussels

06 January 2009

German Chancellor Angela Merkel hinted within her New Year address on December 31, that she would consider including tax cuts within her proposals for the forthcoming multi-billion euro stimulus package, expected later this month.

Speaking on German television, Merkel said that she intended to "try to relieve all those who pay taxes and other levies”. Merkel has previously voiced her strong opposition to cutting taxes, arguing that this would have an adverse effect on the German economy in the long term as future generations would have to bear the burden of increased debt.

Merkel, of the Christian Democrats (CDU), has come under sustained political pressure from within Germany’s coalition government to implement tax changes as soon as possible. The Bavarian Christian Social Union (CSU), the CDU’s sister party, has warned that it would veto any forthcoming stimulus package that did not include tax cut measures.

The Chancellor, although conceding that some measure of fiscal loosening is required, remains firmly of the belief that deeper tax cuts would lead to lingering public debt for many years. She emphasised her commitment to maintaining a balanced federal budget whilst vowing to help Europe’s largest economy weather the global economic storm. During her address, she moved to rally the German populace, urging Germans to remain optimistic, emphasising that Germany had overcome more challenging economic situations in the past.

Recommended