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Germany's Schäuble Hints At Election Year Tax Cuts

by Ulrika Lomas, Tax-News.com, Brussels

07 September 2016


German Finance Minister Wolfgang Schäuble has said there will be room for tax cuts next year, despite the Government's determination to continue running balanced budgets in the medium-term.

Outlining the federal Government's Budget plan for 2017 in the Bundestag, the lower house of the German Parliament, on September 6, Schäuble said he foresees space for around EUR15bn (USD16.8bn) worth of tax cuts next year.

The Finance Minister said that tax cuts will mostly come from alleviating the effect of "bracket creep," whereby income tax thresholds fail to keep pace with wage inflation, therefore pushing people on relatively modest incomes into higher tax brackets. Schäuble also indicated that payroll taxes would be reduced.

The Budget also includes a 3.7 percent increase in public spending, although Schäuble expects rising tax revenues to cancel out higher expenditure as a result of continued economic growth.

Schäuble said that it is the Government's policy to continue running balanced budgets until at least 2020. However, all eyes will be focused on the next elections to the Bundestag, expected to take place in about one year's time, with the grand coalition of Chancellor Merkel's Christian Democrats and the center left Social Democrats under pressure to loosen fiscal policy.

TAGS: Finance | tax | value added tax (VAT) | fiscal policy | budget | tax thresholds | payroll | Germany | inflation | individual income tax

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