The German state of Schleswig-Holstein has threatened to veto the government’s proposed tax cut initiatives unless it receives EUR70m in compensation.
Schleswig-Holstein’s Prime Minister Peter Harry Carstensen, has announced his intention to reject the government’s growth acceleration law (das Wachstumsbeschleunigungsgesetz) unless his demands for some form of compensation are not met.
Carstensen has expressed his deep concerns that the new law, containing around EUR8.5bn in proposed tax cut initiatives and designed to benefit parents, businesses, inheritors and hoteliers from January 1, 2010, will result in a huge loss in revenue for his state.
Indeed, potential financial losses arising from the implementation of the growth acceleration law are estimated at around EUR130m per year, according to the Kiel Finance Ministry. This would signify a shortfall for the state of approximately EUR70m, and for municipalities, a loss of around EUR60m.
The Free Democratic Party’s (FDP) leader, Wolfgang Kubicki, has also expressed his concerns regarding the government’s proposed tax relief measures.
Emphasizing that he does not fundamentally oppose the plans, Kubicki nevertheless underlined the fact that the states should not be expected to pay for the reductions in taxation, and called for the government to provide a means of compensation.
Alluding to the new debt brake law inscribed in Germany’s constitution, which aims to eradicate all new debt by 2020, Kubicki reminded the government that the EUR80m pledged to Schleswig-Holstein in support of this aim would immediately be swallowed up by revenue losses arising from the growth acceleration law. Kubicki proposed that the government allocate 1% of value-added tax revenue to the state as compensation.
Germany’s Finance Minister Wolfgang Schäuble nevertheless dismissed the calls, pointing out the fact that representatives of Schleswig-Holstein recently approved the coalition agreement, containing the government’s proposed tax relief initiatives.
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