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Germany Successfully Lowers Tax Break Cost

by Ulrika Lomas,, Brussels

16 August 2013

The German Finance Ministry has published details of its latest subsidy report, depicting the trends in federal financial aid and tax breaks over the period 2011-2014, and highlighting in particular the fact that the revenue shortfall arising from tax shelters has been falling continuously over the past few years.

According to the Government, the cost of tax breaks to the state is currently at its lowest level since 1999. Indeed, the Federation's revenue shortfall from tax benefits will drop to around EUR15.5bn (USD20.7bn) in 2014, down significantly from the EUR18.6bn recorded in 2010 (EUR15.6bn in 2011).

Among the 20 largest tax breaks include the 7 percent reduced rate of value-added tax (VAT) imposed on cultural services, for example books and magazines, representing a total cost to the state in 2014 of EUR3.6bn.

Other major tax shelters listed in the report include the tax break granted to businesses deemed to have a particularly high tax burden (EUR2bn), the energy tax break accorded for the production of electricity (EUR1.8bn), the tax reduction available for renovation costs (EUR1.5bn), the tax break aimed at promoting private pension plans (EUR1.1bn), and the reduced rate of VAT benefiting the hotel industry, in force in Germany since January 1, 2010, (EUR0.96bn).

Determined to secure stable tax revenues, and to redress the public finances as a matter of priority, the Government is committed to regularly reviewing and, where possible, abolishing existing tax shelters. Reducing the number and cost of tax breaks is seen as vital to consolidating the state budget and to ensuring the efficiency and financial capacity of the state.

TAGS: Finance | tax | business | value added tax (VAT) | energy | budget | corporation tax | tax rates | Germany | tax breaks | individual income tax | European Union (EU) | services | Europe | Other

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