Schroeder Faces Swell Of Opposition To Accelerated Tax Cuts

by Ulrika Lomas, Tax-News.com, Brussels

05 November 2003

German Chancellor Gerhard Schroeder’s plan to bring forward 15.5 billion euros worth of tax cuts by one year to 2004 may soon hit the buffers due to continued opposition to the proposals in the Conservative-dominated upper house.

Hoping to kick-start the German economy, which dipped into recession earlier in the year and has been stagnating for a number of months, the government announced in the summer the rescheduling of personal income tax cuts penned for 2005 to take place in 2004. However, although the lower house has approved the measures, the upper house has proved a much tougher nut to crack for the German leadership.

"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, who agree in principle with the tax cuts, but object to the manner in which they are to be undertaken.

However, Schroeder’s proposals have also provoked the ire of those on the left who are unhappy at the cuts in unemployment benefit and other welfare services such as state pensions and healthcare which will be necessary to fund the planned tax cuts. These concerns prompted some 100,000 protestors to march through the streets of Berlin at the weekend.

Nevertheless, the Chancellor remains optimistic that the reforms can be pushed through, commenting that he hopes all sides will 'sit around the table and say: this is the way to go'.

"We need an impulse now that moves our economy forward", added Schroeder.

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