German Finance Minister Hans Eichel's plans to bring forward tax cuts scheduled for 2005 by one year received a boost yesterday when the conservative opposition, which has a majority in the country's upper house, said it would support the plan for additional cuts worth €15.5bn if the government could give a credible explanation of where the money would come from.
Opposition leaders had been divided over the tax-cutting plans, but after a meeting in Berlin of the CDU's executive yesterday, chairwoman Angela Merkel said the CDU was now united in calling on the government to table proposals "that would be a real contribution to economic growth and creating jobs".
Plans were already in place to reduce the top rate of income tax next year from 48.5% to 47%, but Hans Eichel's proposal would see the top rate further reduced to 42% in 2004. Chancellor Gerhardt Schröder said last week that the funding gap resulting from tax cuts would be filled by cuts in subsidies, privatisation revenues and new borrowing; Hans Eichel has said that he is allowing for net new borrowing next year of €31.8bn, €7bn more than previously planned.
In addition to needing opposition support, the government also has to reckon with the European Commission, given Germany's rising fiscal debt problems which have lead to it breaching the Growth and Stability Pact threshold of 3% of GDP. The budget deficit hit 3.6% last year, leading to the imposition of an EU fine for breaking the Pact rules. Some recent estimates for 2003 have projected a worsening scenario, with debt rising to a potential 4% by the year end.
The EU's willingness to accommodate Germany is thought to depend on how far the Chancellor is prepared to go in terms of structural change and increasing labour market flexibility. He has frequently talked about such moves, but in practical terms nothing much has been done.
.
Network Tweets
Network BlogsContent
provided by
|
Archive | Resources | Partners | Site Map | Links | Newsletter Archive | Contact | RSS Feeds | About | Syndication | Advertising & Marketing | Recruitment | Terms & Conditions | Privacy & Cookies
Copyright © 2012 - All Rights Reserved - Tax-News.com
IMPORTANT NOTICE: Tax-News.com has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments.
Write a comment