The newly re-elected Social Democrat-Green coalition government in Germany agreed this week to increase payroll taxes from 19.1% to 19.5% next January, in an attempt to close the country's growing budget gap. In order to secure more funds for the retirement benefit scheme, the maximum monthly income on which the levy must be paid will also be increased by 13%, to 5,100 euros.
Reporting on the decision, reached on Monday, the Associated Press revealed that the larger than previously agreed hike sparked outrage from opposition parties, who warned that the move would destroy jobs.
Germany's labour costs are already among the highest in the world, and this additional burden is likely to act as a further brake on job growth, economists have warned.
However, speaking to the AP, Green Leader, Fritz Kuhn explained that the increase in the retirement tax, although higher than intended, would put the government's books 'on the safe side'.
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