German Tax Revenues To Fall Short By EUR50 billion

by Ulrika Lomas, Tax-News.com, Brussels

12 May 2004

Germany’s struggle to keep in line with European deficit rules look set to continue well into the future after it was revealed last Friday that tax revenues will fall short of targets by EUR50 billion over the next three years.

Reports citing a leaked draft of a Finance Ministry dossier tell how Finance Minister Hans Eichel’s plans to keep the nation in line with the European Growth and Stability Pact look likely to fail, consigning Germany to a fourth consecutive year in breach of the rules in 2005.

Indeed, even Eichel himself appears pessimistic, telling a national newspaper last weekend that he “cannot rule out” the possibility that Germany will break the pact again next year.

In a bid to boost economic activity and rid the country of its growing reputation as a high cost and bureaucratic place to do business, the German parliament in December ratified Schroeder’s flagship ‘Agenda 2010’ economic and welfare reforms, which included EUR9 billion in tax cuts.

However, economic growth projections remain disappointing and according to the report the effect of this will be a EUR7.5 billion shortfall in tax revenues in 2004. The Finance Ministry then expects an EUR8.5 billion shortfall in 2005 and a EUR9.5 billion shortfall in 2006, the report states.

A government tax panel is scheduled to release official tax revenue forecasts on May 13.

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