German Finance Minister Stands Firm On Tax Reform Timetable

by Ulrika Lomas, Tax-News.com, Brussels

10 August 2001

Finance Minister Hans Eichel is standing his ground against repeated calls to bring forward tax reforms to boost Germany's ailing economy. According to Eichel the government plans to stick to its policy of reducing in stages its annual borrowing requirement to zero by 2006.

In an interview on German television this week, Eichel responded to calls from opposition politicians and analysts to stimulate economic growth with tax cuts that were originally planned for a further date in the future.

'That naturally cannot be financed,' Eichel said, 'there is also no majority for such a move in the Bundesrat (upper house of parliament) nor the Bundestag (lower house). It would be grand nonsense.' He added that the economy was slowing down as a result of overall slow economic growth around the world and it would be foolish for governments to intervene when there are such global influences at play.

The Minister explained: 'We have to be clear about the fact that, in an era of open markets, no national government can steer the economy.' Eichel pointed to the recent economic recession experienced by Japan when the government tried to combat the problem by accepting higher debt - levels that are more than twice as high as in Germany. 'The results were terrible,' he said.

Eichel also said he feels confident that the 2001 budget would hold no dramatic changes as he said: 'The budget will change slightly over the course of the year. We have some risks on the revenue side (tax receipts slide as a result of the slower economic growth). But I also have other additional revenues. In any case we will do everything we can to ensure that the route to cut the level of new debt each year will be rigorously pursued - and we will succeed.'

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