Germany Mulls Tax Hike For Top Earners

by Ulrika Lomas, Tax-News.com, Brussels

08 July 2010

Determined to resolve the increasingly problematic issue of 'fiscal drift' in Germany (die kalte Progression), leader of the Christian Social Union (CSU) Horst Seehofer has recently called for the tax burden to be increased on the country’s top earners.

According to Seehofer, the party’s Finance Minister Georg Fahrenschon (CSU) is due to present tax proposals in the autumn to solve the issue and to ascertain exactly what the top rate of tax should be and at what level of income it should be set. Warning against increasing the top rate of income tax in isolation, Seehofer emphasized the need for a whole concept, stating that otherwise the measure would mean "tax rises for all", with low- and middle-income earners also affected.

Seehofer also warned against excessively high taxes for small- and medium-sized companies, subject to income tax rather than corporate tax, maintaining that by merely increasing the top rate of income tax, two thirds of middle-sized companies would be adversely affected by the increase. These companies have protected jobs during the crisis, he noted, and would be penalized by such a move.

Leader of the Social Democrat’s (SPD) Sigmar Gabriel has also recently called for the top rate of income tax in Germany to be increased from 42% currently to 50%, while acknowledging the need for a corresponding rise in the threshold at which the rate is set, from EUR52,000 to EUR70,000.

The Free Democratic Party is due to present its proposals for a reform of the country’s system of taxation by the autumn.

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