German Tax Cuts Safe, Westerwelle Insists

by Ulrika Lomas, Tax-News.com, Brussels

11 May 2010

Despite the unveiling of the somewhat disappointing May tax estimate, leader of Germany’s Free Democratic Party (FDP) Guido Westerwelle nevertheless expressed his intention to firmly adhere to his party’s tax cut plans.

Alluding to the fact that tax revenue is predicted to steadily increase over the course of the next few years, albeit slower than previously anticipated, reaching a record level of over EUR560bn in 2013, Westerwelle made clear that the aim of his party is to press ahead with its plans to introduce further tax relief for low- and middle-income earners in the current legislative period.

According to Westerwelle, the financial crisis has shown that Germany needs a strong currency, and behind a strong currency must be a strong economy. Westerwelle explained that a strong economy is only possible provided that individuals have spending power, and that there is investment. Westerwelle underlined his belief that a fair tax system would be the best employment programme for the country.

Germany’s Finance Ministry recently released figures contained in the latest tax estimate, which show that tax revenue for the government, states and municipalities is expected to be around EUR38.9bn less in the coming years than previously anticipated, with a EUR1.2bn shortfall predicted in 2010, a EUR11.7bn drop expected in 2011, a EUR12.3bn shortfall in 2012, and EUR13.7bn less in 2013.

Finance Minister Wolfgang Schäuble emphasized that the figures will serve as a good basis for future negotiations within the ruling coalition, indicating that a strict savings course will be followed, enabling the government to save around EUR10bn a year, and highlighting the need to adhere to the country’s debt brake rule.

According to the Finance Ministry, the May tax estimate will serve as a basis for both the country’s 2011 budget as well as the country’s 2014 financial plan.

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