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OECD Warns Germany Over Tax Increases

by Ulrika Lomas, Tax-News.com, Brussels

18 December 2002


In its Economic Survey of Germany, the Organisation for Economic Cooperation and Development (OECD) has warned that German GDP growth over the coming two years may be weakened if the government continues to rely on tax increases to reduce its budget deficit level.

The organisation announced this week that it expects the deficit to amount to 3.7% of GDP this year, and 3.3% next year, but to fall to below the Stability and Growth Pact ceiling by 2004, settling at around 2.6% of GDP.

However, it cautioned that:

'Domestically, growth may turn out lower if deficit reduction is implemented mainly via revenue increases. Forceful reform actions on the other hand could invigorate confidence and strengthen growth.'

The OECD also warned that the country's growth projections could be further dented as a result of the 'uncertainty surrounding the pace of the recovery of world trade and the time needed for consumer and investor confidence to return.'


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