German Economic Institutes Lambast Schroeder's Tax Increases

by Ulrika Lomas, tax-News.com, Brussels

24 October 2002

Germany's top economic institutes have slammed the tax increases agreed last week by Germany's SPD/Green Party coalition government, under which companies will face limitations on their ability to carry foward losses, and individual taxpayers will have to deal with a reduction of the tax benefits for homeowners, and an extension of capital gains taxes on share transactions

The measures are expected to raise 4.2 billion euros next year, rising to 11.3 billion by 2006, but the institutes said yesterday in their twice-yearly report that the tax increases could prove counterproductive. Reducing their growth forecasts to 0.4% for this year and 1.4% in 2003, the institutes said that reductions in expenditure would have been more appropriate at this stage of the economic cycle.

The report says that unemployment will remain above 4m for the next two years, and that the budget deficit will top 3% this year, breaking the Euro-Zone's 'stupid' Growth and Stability Pact.

Recommended