Schroeder Seeks Cabinet Approval For 2004 Tax Cuts

by Ulrika Lomas, Tax-News.com, Brussels

14 August 2003

A meeting of the German cabinet this week could result in the approval of proposed legislation that will bring forward planned tax cuts to 2004.

In a bid to fix the country's ailing economy, Chancellor Gerhard Schroeder wants the tax cuts - originally pencilled in for 2005 - to commence in January next year, as part of a package worth 15 billion euros.

The accelerated tax cuts have been broadly supported by the business lobby, and head of the HDE retailers' association Holger Wenzel recently told Bloomberg that "the sooner they are in the bag, the better".

However, the Schroeder administration has recently attracted the ire of the European Commission with regard to its fiscal policies, not least because the eurozone's largest economy is likely to breach the EU's deficit rules again this year, as a consequence of dwindling tax revenues.

Nevertheless, Finance Minister Hans Eichel is hoping the blow to tax revenue will be softened by promised welfare cuts, and the scrapping of tax breaks for homebuyers and commuters. There are also plans to levy business tax on self-employed workers.

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