German Economic Institutes Call For Tax Cuts

by Ulrika Lomas, Tax-News.com, Brussels

14 April 2017

A group of economic institutes in Germany has said it is high time the Government began reducing the tax burden, which is on an "upward trend."

Germany's five leading economic research institutions noted in their joint spring economic forecast to the Government that the German economy is in its fifth year of moderate growth. However, they suggested that Germany's high and rising tax burden could stifle investment in the years ahead.

"Tax revenues in relation to gross domestic product now exceed 40 percent and will continue to rise, partly due to progressive income taxation," the institutes said.

"It is high time that economic policy puts its focus on the long term, limits the increase in the tax burden, and strengthens investment expenditures, especially in education, through budgetary shifts," they added.

Despite the presence of a budget surplus, the German Government has consistently resisted calls for major tax cuts, favoring instead a policy of fiscal responsibility.

While Finance Minister Wolfgang Schauble recently suggested that tax cuts would be delivered after September's election in form of adjustments to income tax thresholds, he poured cold water on the idea of more comprehensive tax by say that the Government would not have "unlimited leeway" to cut taxes.

It is the Government's policy to continue running balanced budgets until at least 2020, he said.

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