Leaked Document Suggests Tax Cuts On The Cards In Germany

by Ulrika Lomas, Tax-News.com, Brussels

17 October 2001

A leaked Finance Ministry document in Bonn earlier this week added weight to speculations that substantial personal income tax cuts may be on the cards in Germany.

Although the government refused to comment following the leak on whether the Finance Ministry's GDP growth forecast had been lowered from 2.25% to 1.5% as reports have suggested, officials did say that new forecasts would be released shortly, with new tax projections expected in early November.

The German government has consistently dismissed calls to bring forward tax cuts, and in the immediate aftermath of the terrorist attacks in September, Finance Minister Hans Eichel made the unpopular decision to tack some tax increases onto a package of anti-terrorist measures, a move which was condemned by opposition politicians variously as 'a completely wrong decision', and a 'dramatic mistake'.

However, German tax experts believe that in the current climate, the idea of a sizeable but temporary tax cut may be starting to appeal, a theory supported by the document inadvertently released this week. Such a move would almost certainly dent the credibility of the Finance Minister by slowing progress on his flagship debt reduction strategy.

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