After pushing through several billion euros in tax cuts, German Chancellor Gerhard Schroeder has indicated that he is willing to discuss further tax reforms being formulated by opposition Christian Democrats, ensuring the taxation issue is to remain on the agenda in the months ahead.
Referring to draft legislation tabled by Christian Democrat financial spokesman Friedrich Merz which calls for a radical simplification of the German tax code, Schroeder told Bild am Sontag recently: “I am definitely in favour of sitting down with the [Christian Democratic] Union and reaching an agreement to simplify the tax system.”
The CDU plans to present its proposals before parliament in ahead of the summer recess, though Schroeder points out that the party leadership may have some convincing to do within its own ranks before it presents a united front, particularly on the issue of the subsidy cuts required to make the reform package work. “I just saw how the Union fought in the mediation committee for almost all of the subsidies that we wanted to abolish,” said the Chancellor.
The centrepiece of the CDU proposals is the replacement of the current progressive income tax rates ranging between 16% and 45% with three basic brackets of 12%, 24% and 36%. The plan also calls for the first 8,000 euros of a family member’s income to be exempt from taxation. However, the downside to this will be the elimination of various tax deductions and subsides as well as the taxing of capital gains as income, adding around 10 billion euros to the government’s revenues according to the German daily the Frankfurt Allegmaine Zeitung.
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