Germany's Schäuble Rules Out New Tax System Before 2013

by Ulrika Lomas, Tax-News.com, Brussels

05 November 2009

Germany’s freshly appointed Finance Minister Wolfgang Schäuble has ruled out the possibility of a fundamental reform of the country’s tax system until the end of the current legislative period.

Firm in the belief that there will be neither a balanced budget nor a fundamentally new income tax system in Germany before 2013, Schäuble has argued that it is not currently the right time to undertake radical reform.

Determined to honour the pledges contained in the recent coalition agreement, however, Schäuble has confirmed government plans to carry out a limited tax reform programme from January 1, 2010 of around 1% of gross domestic product, suggesting that this is both economically right and justifiable.

He has also made known his intention to strive towards implementing additional tax reductions of around EUR20bn in 2011, provided that this is possible to legislate.

An advocate of the country’s current system of linear income tax rates, Germany’s new Finance Minister has, nevertheless, revealed that he is willing to implement a graduated system of income tax tariffs, as recently agreed in the coalition contract, provided that a degree of caution is exercised, and that considerable scope to introduce tax cuts exists.

Schäuble’s comments mark another blow for the newly elected Coalition government, as hopes for financing their tax cut plans through a future surge in tax revenue are dashed. Despite welcome news of improved economic prospects, an increase in revenue is not expected either this year or next, according to recent predictions.

Recommended