Businesses Allied To Merkel Call For Stealth Tax Solution

by Ulrika Lomas, Tax-News.com, Brussels

23 June 2014

The business wing of German Chancellor Angela Merkel's Christian Democratic Union (CDU) party has called for the Government to commit to raising tax thresholds in line with inflation to stem stealth income taxation.

The CDU's small business union (MIT) said the personal tax-free allowance and income tax thresholds should automatically and regularly be adjusted in line with inflation. This would prevent taxpayers from paying tax in higher rate bands when wages increase faster than income tax thresholds, commonly known as bracket creep, but generally referred to as "cold progression" in Germany.

The union said that thresholds should only be frozen in exceptional circumstances, for example in the event of a budget crisis. It said it would champion the concept at the CDU party conference in December. The CDU's coalition partner, the Social Democrats (SPD), has made clear, however, that the party will only agree to tax cuts if they are funded through a hike to wealth taxes.

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