More Bad News For Eichel With Tax Revenues Set To Plunge

by Ulrika Lomas, Tax-News.com, Brussels

10 November 2003

The German Finance Ministry revealed last Thursday that federal and state tax revenues are set to fall by nearly 20 billion euros in 2003 and 2004 as rising unemployment and recession hit tax receipts.

According to a statement released last week by the government, tax revenues in 2003 are forecast to undershoot expectations by 8.2 billion euros, whilst next year the tax take will decline by a further 10.9 billion euros. This additional burden is likely to be shouldered in roughly equal parts by the federal and state governments.

The Finance Ministry blames the situation on Germany’s ailing economy, explaining that the estimated income tax take for 2003 “mirrors the labour market situation.”

"Sales tax revenue continues to suffer from weak domestic demand” it added.

Although Finance Minister Hans Eichel is desperate to pass 15.5 billion euros of tax cuts next year (brought forward from 2005), the government is facing dogged opposition to the plans in the upper house.

“We have to get out of this stagnation”, said Eichel in a plea to the opposition-controlled upper house. “Germany and Europe need growth”.

However, whilst most conservatives in the opposition support the tax cuts in principle, it is the massive amounts of borrowing required to fund them that they are having a hard time accepting. "Bringing forward the tax reforms is important. But it has to be done seriously and not on tick," observed the conservative-leaning governor of Baden Wuerttemburg, Erwin Teufel, echoing the opinion of many on the centre right.

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