A compromise reached by a German parliamentary committee will allow the government to abolish tax exemption on life insurance policies from next year as part of its pension reforms.
The plans by the Schroeder administration hit a snag earlier in the month after the Opposition-controlled Bundesrat refused to pass the measure, requiring the proposal to be passed on to a parliamentary mediation committee for resolution.
Under the committee's deal, announced by junior Finance Minister Barbara Hendricks on Wednesday, half of the amount paid out from a life insurance policy will be subject to taxation provided that the policy is at least twelve years old.
The government had previously intended to totally withdraw the tax exempt status of life insurance funds and tax pensions at retirement instead of at the contributions stage to encourage more Germans to save for their pensions.
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