Germany's Seehofer: Tax Cuts From 2011, Perhaps Sooner

by Ulrika Lomas, Tax-News.com, Brussels

22 October 2009

Germany’s future Coalition parties, the Christian Democratic Union (CDU) and the Free Democratic Party (FDP), are eager to implement significant reductions in income tax from 2011, at the very latest, according to Christian Social Union (CSU) leader Horst Seehofer.

Seehofer has pledged that a reduction in taxation will undoubtedly take place in 2011. Indeed, the CSU’s leader has even insinuated that tax reductions could be introduced from as early as next year, in a bid to stimulate investment and boost consumption. According to Seehofer, it is simply “logical to begin as early as possible.”

It has also emerged recently that both the CDU and the FDP have finally cast any remaining differences aside, and reached a consensus on key issues. With a final round of negotiations due to take place shortly, and time running out, a more positive outcome from the talks now appears possible.

Given the recent ongoing political wrangling between the future Coalition parties, such an admission of a basic understanding provides a welcome calm in the storm. Yet the CSU remain convinced that the government will ultimately elect to implement tax cuts of around EUR20bn, instead of the EUR35bn sought by the FDP.

Although the CDU’s Secretary General Ronald Pofalla has announced that the proposed tax cuts will not be financed by any increases in social contributions, it remains, as yet, unclear how the additional tax cut proposals will be financed. Various tax relief initiatives outlined for 2010, adopted by the previous Coalition government, are already inscribed in the country’s statute book.

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