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Germany 'On The Move', Says Schroeder

by Ulrika Lomas, Tax-News.com, Brussels

23 December 2003


After months of debate and hours of haggling in the parliamentary mediation committee, German Chancellor Gerhard Schroeder will finally see his much-vaunted tax cut go into effect on January 1 next year, following parliamentary approval of his flagship ‘Agenda 2010’ tax and welfare reform package last Friday.

Although last week’s compromise deal with opposition Christian Democrats will mean Schroeder can only bring forward half of the tax cut originally slated for 2005, the New Year will see just under 9 billion euros in early tax cuts taking place. The package also includes reform of local taxes and changes to the tax regime surrounding health and life insurance, and will pave the way for a tax amnesty in 2004.

Although Schroeder lauded the bill as a “signal that Germany is moving”, many experts doubt the tax cuts will make quite the difference to the country’s stagnant economy that the Chancellor hopes.

“The tax cuts will have practically no effect on the economy, except for maybe a small psychological effect,” Lothar Hessler, of HSBC Trinkhaus & Burkhardt, told Reuters following the announcement of the compromise deal struck by the government and the opposition parties last week.


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