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Bundesrat Approves Budget Support Act

by Ulrika Lomas,, Brussels

30 November 2010

The German Bundesrat, or upper house of parliament, has approved the budget support act, which implements a number of key elements contained in the government’s 2011-2014 future package (Zukunftspaket), and includes a series of significant fiscal measures.

Designed to save in the region of EUR80bn over the course of the next four years, the future package aims to maintain the social state, to strengthen the country’s economy, and to simplify administration. The government has also pledged to invest in education and research in a bid to boost growth and employment.

With the emphasis on climate policy, the coalition’s budget support act provides for the introduction of a new airline tax. It also provides for a reduction in existing eco tax breaks currently benefiting industry in Germany.

According to the government, the cut in eco tax breaks accorded to energy-intensive companies will not now be as drastic as originally intended, as it does not wish for any major tax disadvantage to endanger hundreds of thousands of jobs in Germany. Consequently, the government is proposing to make up for the shortfall in revenues by introducing a moderate rise in tobacco tax.

In its statement, the government notes that other agreed savings measures contained in the future package will be implemented by means of the normal budgetary process. Such measures include the introduction of a nuclear fuel tax, expected to generate in the region of EUR2.3bn in additional revenues for the government annually, and to yield EUR14bn by 2016.

Despite recent reports that the Prime Ministers of the Christian Democratic Union-led (CDU) states planned to oppose the nuclear fuel tax, an agreement with the government was finally reached at the eleventh hour. The Bundesrat approved both the tax and plans to increase the working lifetimes of nuclear power plants. The CDU-led states had feared losses in both corporate and trade tax revenues of up to EUR600m as a result of the tax, as the companies concerned will be able to deduct the costs as business expenses. The government has pledged to protect the interest of the states, however.

Following its approval by the Bundesrat, the law can now enter into force as planned on January 1.

TAGS: environment | tax | business | interest | law | aviation | budget | education | Germany | tax breaks

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