German Tax Cut Proposals Hit The Buffers In Upper House

by Ulrika Lomas, Tax-News.com, Brussels

11 November 2003

Much to Chancellor Gerhard Schroeder's dismay, Germany’s tax cut plans for 2004 have ground to a halt in parliament after the opposition-dominated upper house last week used its majority to block the plans.

This will mean that Chancellor Gerhard Schroeder’s grandiose tax and labour market reform proposals dubbed ‘Agenda 2010’, which include 15.6 billion euros worth of tax cuts brought forward from 2005 to 2004, will potentially face weeks of negotiations before a compromise can be reached.

Whilst conservative representatives from the regions agree with the tax cuts in principle, it is concessions such as subsidy cuts for homeowners and commuters and extra government borrowing that is their primary objection.

"We want these tax cuts... We want to make them possible, but with different financing. Not financing on credit," Edmund Stoiber, leader of the Christian Social Union and premier of Bavaria recently announced, according to a Reuters report.

Meanwhile, a dismayed Gerhard Schroeder told reporters that it was wrong to "combine the necessary tax cut aimed at achieving growth and employment with totally unrelated issues."

"We must now establish clear conditions as quickly as possible, we need clarity by the beginning of December or we won't achieve what we want, which is to reinforce the current, undeniable momentum for growth in pre-Christmas trading," the Chancellor urged.

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