Germany's Chances For Tax Cuts Fade

by Ulrika Lomas, Tax-News.com, Brussels

22 March 2011

Unveiling the cornerstones of the federal 2012 budget in Berlin, Germany’s Finance Minister Wolfgang Schäuble provided his assurances that the budget remains secure, despite uncertainties surrounding expected revenues from both the proposed financial transactions tax and the nuclear fuel tax. The minister did, however, indicate that the chances of implementing tax cuts in Germany in this legislative period have diminished in the wake of the crisis in Japan.

Ever hopeful of successfully implementing a financial transactions tax in Europe, in one way or another, Finance Minister Schäuble expressed his optimism and confidence that the European Commission would eventually abandon its reservations on the issue. Schäuble is expecting revenues from the introduction of such a tax of around EUR2bn.

Despite the recent decision by Germany’s Chancellor Angela Merkel to temporarily shut down seven of the country’s older nuclear power stations while it reconsiders its energy policy, following events at the Fukushima nuclear power plant in Japan, Finance Minister Schäuble reiterated that the country’s budget is secure.

The decision prompted concerns regarding a possible shortfall in fiscal revenues for the government from the nuclear fuel tax, which is due to generate in the region of EUR2.3bn for the state in additional revenues between 2011 and 2016.

Nevertheless, despite the minister's assurances on the government’s 2012 budgetary plans, it remains to be seen as to whether or not there will still be scope to implement tax cuts in Germany before autumn 2013.

Underlining the fact that tax cuts are not the government’s top priority, Schäuble reiterated that reducing the country’s high debt continues to take precedence. Ironically, Finance Minister Schäuble had just announced that he is no longer ruling out tax cuts in Germany in the current legislative period.

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