German Lower House Agrees 2012 Budget

by Ulrika Lomas, Tax-News.com, Brussels

29 November 2011

The German Bundestag, or lower house of parliament, has adopted the country’s 2012 budget bill, providing for expenditure of EUR306.2bn (USD409bn) and for expected revenues of around EUR280.1bn, of which EUR250bn will be from taxes, resulting in net borrowing next year of an estimated EUR26.1bn.

The budget bill was adopted during a third reading by 307 votes to 253.

Commenting on the budget, the federal finance ministry notes in its statement that federal spending in 2012 is set to increase by around EUR400m compared to this year. The ministry explains that the moderate increase reflects the government’s commitment to continuing its growth-friendly budgetary consolidation course.

According to the ministry, the black-yellow coalition government plans to invest the additional money in the maintenance and expansion of transport infrastructure in Germany, and plans future investment in the areas of energy, education and research, with EUR12bn earmarked for research and education up until 2013.

In accordance with the country’s debt brake rule, the government aims to ensure a structurally balanced budget by 2016.

Unveiling details of the 2012 budget recently, German Finance Minister Wolfgang Schäuble emphasized that in 2012 the federal government plans to spend taxpayers' money “carefully and responsibly” and he highlighted coalition plans to give back additional tax revenues in the form of modest tax cuts, starting in 2013.

As part of the EUR6bn tax cut plans, designed to reduce the fiscal burden on low- and middle-income earners in Germany from 2013, the government plans to increase the tax-free allowance and to raise tax brackets.

However, Germany’s main opposition parties, the Social Democrats (SPD) and the Green Party have opposed the plans from the outset and announced their intention to veto the albeit moderate tax cuts in the Bundesrat or upper house of parliament.

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