Germany's CDU Advocates Tobacco Tax Rise

by Ulrika Lomas, Tax-News.com, Brussels

06 September 2010

Within the ruling Christian Democratic Union (CDU) party in Germany there are growing calls for the tax levied on tobacco to be increased in order to help finance the government’s long-awaited plans for tax simplification.

Under the proposals, the cost of a packet of cigarettes, currently around EUR4.50, would progressively rise by 10 cents annually to EUR5 by 2015, marking a total increase of 50 cents per packet.

Such a decision would serve to generate in the region of EUR1.3bn a year for the government. Financial experts within the CDU insist that the move could create more scope by January 1, 2011 for the coalition's reform plans. Back in June, the CDU and the Free Democratic Party submitted a total of 90 proposals for tax simplification to German Finance Minister Wolfgang Schäuble, including plans to introduce pre-completed tax returns. Up until now, Schäuble has shunned any large-scale reform plans for fear of creating additional gaps in the budget.

According to financial expert Christian von Stetten (CDU), Germany needs to comprehensively simplify the current tax system. Any resulting shortfall in fiscal revenues could in part be offset by a moderate increase in tobacco tax, he noted.

Within the cigarette industry itself, the CDU’s proposals have been met with a surprising degree of acceptance. Prices have remained unchanged in Germany for five years.

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