Merkel Appoints Flat Tax Advocate To CDU Campaign Team

by Ulrika Lomas, Tax-News.com, Brussels

18 August 2005

Angela Merkel, leader of the Christian Democrat Union (CDU), Germany's principal opposition party, has appointed a prominent advocate of a flat tax system as a finance policy expert to her election campaign team.

Paul Kirchof, a professor of finance at the University of Heidelberg and a member of Deutsche Bank's supervisory board, was appointed to the CDU's campaign team in an announcement by Merkel in Berlin on Wednesday.

Kirchof espouses a complete overhaul of the country's tax system, and advocates sweeping away Germany's extensive system of taxpayer subsidies and replacing it with a flat rate of income tax charged at 25%. The appointment has raised eyebrows in many quarters since Kirchof's proposals go far beyond the tax reform plans announced by Merkel in the CDU's election manifesto. However, the move is being interpreted by observers as a statement of long term radical intent on tax and economic policy by the CDU should Merkel oust Chancellor Gerhard Schroeder in September's election.

The appointment has been supported by the BDI industry lobby, which represents more than 100,000 German companies, and it was described by the BDI's head Juergen Thumannas as a "magnificent" move on the part of the CDU. Nonetheless, it may be harder to convince Germany's 3.4 million private enterprises, the majority of which pay income tax, to give up subsidies and tax breaks.

Meanwhile, Finance Minister Hans Eichel has poured scorn on Kirchof's tax plans, remarking in an interview with Financial Times Deutschland that they "can't be financed...can't be applied in reality (and) means the end of any respectable budget and finance policy".

Kirchof is not a member of the CDU, and is not expected to be given a ministerial portfolio in a possible CDU government. He is also a vocal critic of Merkel's proposal to raise value added tax by 2% to 18% to pay for reductions in unemployment insurance contributions, warning that the tax hike would reduce retail sales and fall unfairly on low income families.

An opinion poll conducted last week by Forsa placed the CDU and Bavarian sister party Christian Social Union on 43%, comfortably ahead of the ruling Social Democrats on 29%.

Recommended