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The German Finance Ministry has recently published details of predicted federal expenditure and revenue figures for 2013, together with key information relating to Government tax policy in 2013.
The Finance Ministry highlights the fact that the federal budget for 2013 reflects the Government’s pursuit of a growth-friendly consolidation course, noting that new debt is to be reduced in 2013 to EUR17.1bn (USD22.6bn) and pointing out that the key figures demonstrate a further recovery of the country’s public finances.
Germany’s 2013 budget will enable the Government to adhere to the debt brake rule at federal level three years earlier than required. Enshrined in basic law, Germany’s debt brake rule provides for a maximum structural deficit from 2016 of 0.35% of gross domestic product. The Government aims to completely eliminate the structural deficit by 2014.
Tax revenues in 2013 are expected to stand at EUR260.6bn, up 1.8% from 2012 (EUR256bn), and providing the largest source of income for the federal Government. In the 2013 budget, tax revenues will cover 86.3% of total expenditure.
As regards tax policy, the Finance Ministry explains that the law aimed at reducing fiscal drift in the country’s income tax system will contribute to limiting the tax burden on individuals. The law provides for a two-stage rise in the basic personal tax allowance. The tax-free allowance is to rise by EUR126 in 2013 to EUR8,130 and by a further EUR224 (to EUR8,354) in 2014. The entry rate of income tax remains unchanged. This will lead to an annual shortfall of tax revenues of up to EUR2.6bn.
Germany’s transport tax amendment law contains changes to both the country’s insurance tax law and to the motor vehicle tax law. The changes in the insurance tax law are intended to reduce bureaucracy and to simplify taxation, as well as to secure revenues and to create greater legal certainty. Changes to the motor vehicle tax law extend the tax exemption accorded for purely electric cars, as provided for in the Government’s electro mobility programme. The law will lead to annual tax losses of over EUR40m.
The German legislation from December 5, 2012, which amends the energy and electricity tax laws and provides for changes to the aviation tax law, creates the legal framework for the continuation of the tax break currently benefiting energy-intensive companies in the manufacturing industry beyond December 31, 2012. The tax break is to be extended for a period of ten years from January 1, 2013, at current levels, provided that businesses operate energy or environmental management systems and fulfil specific energy efficiency targets. These measures will result in annual tax losses of an estimated EUR2.3bn.
From January 1, 2013, the aviation tax law will be modified and the plane ticket tax rates permanently fixed at the reduced rates of EUR7.50, EUR23.43 and EUR42.18, depending on the destination. A further reduction in the aviation tax rates in 2013 has therefore been ruled out.
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