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Merkel Slams 'Blockade' Of Energy Efficiency Tax Breaks

by Ulrika Lomas, Tax-News.com, Brussels

23 November 2012


German Angela Chancellor Merkel has called for an end to the ‘blockade’ in the Bundesrat (upper house) of government proposed tax incentives, aimed at promoting energy efficiency improvements in the home.

Merkel stressed that as regards facilitating the shift in energy, there are still a whole series of challenges that lie ahead, particularly in terms of improving renewable energy provision.

While welcoming the “reasonable” level of cooperation from the federal states, Merkel nevertheless criticized the ongoing stalemate in the Bundesrat with regards proposed tax incentives designed to improve energy efficiency in the home. The tax breaks will boost investment and generate additional fiscal revenues for the state via increased building activity, Merkel argued. To guarantee a successful shift in energy, it is essential to also make progress as regards energy efficiency, she stressed.

Within the framework of the coalition’s energy policy, which aims to achieve a rapid shift in energy policy away from nuclear power to renewable energy, the government drafted a bill to enable the ambitious targets set to be achieved.

The bill provides for the introduction of tax breaks, accorded to individuals electing to carry out energy efficiency improvements in the home, applicable to homeowners of pre-1995 properties, provided that the improvements significantly reduce the energy demands of the building. Under the terms of the bill, property owners would be able to deduct from tax 10% of all home improvement costs annually for a period of up to ten years, a measure set to cost the government EUR1.5bn.

Defending the bill at the time, the government underscored that the aim is to help Germany reduce greenhouse gas emissions by 40% by 2020 and by at least 80% by 2050. By 2050, the coalition aims to lower primary energy needs by 50%.

Although the bill was adopted by the Bundestag, it has been rejected by the Bundesrat. The federal states argued that the measures would simply lead to a significant shortfall in revenues for both the states and communities, due to bear the brunt of the losses. The Bundesrat also complained that the measure in its current form would also benefit wealthy individuals in Germany.

TAGS: individuals | environment | tax | tax incentives | energy | Germany | tax breaks

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