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SPD Resolution Omits Reference To Top Tax Hike

by Ulrika Lomas,, Brussels

25 October 2013

During an extraordinary party convention, Germany's Social Democrats (SPD) adopted a resolution serving as a basis for official coalition negotiations with Chancellor Merkel's Christian Democratic Union (CDU) party, with no specific stipulation that the top rate of income tax must rise if an alliance is to be formed.

In its ten-point resolution, the SPD outlined the issues that must be addressed in the upcoming discussions. Here, the party underlined the need to effectively regulate the financial markets and to ensure that the financial markets contribute to the costs of overcoming the crisis, notably via the introduction of a financial transactions tax. Furthermore, the Social Democrats emphasized the importance of better combating tax evasion, to recoup vital lost tax revenues that are urgently required for major investment projects.

Yet this may not be the end of the matter. The SPD also agreed within the framework of its resolution that it would strive to make progress on all matters contained in the party's election manifesto. In its manifesto, the SPD pledged if elected to increase the top rate of income tax imposed on individuals earning in excess of EUR100,000 (USD131,730), from 42 percent currently to 49 percent, and to reintroduce a wealth tax in Germany.

While there may be no longer be mention of a wealth tax ultimatum, the party has not abandoned its plans altogether. Indeed, the SPD reiterated in its decision that the CDU must clearly set out how it intends to finance major projects, without recourse either to further debt or to tax rises. A "reliable, solid, and fair" basis for financing communal, federal state, federal government, and welfare projects must be fixed in a future coalition agreement, to ensure that all objectives and improvements are realized, the SPD declared.

The SPD's left-wing faction has certainly not lost sight of plans to raise taxes. Indeed, Hilde Mattheis (SPD) recently made clear that the richest 5 percent of individuals in Germany must contribute to society.

Although the SPD has said that it will not let the issue of tax rises prevent the formation of a Grand Coalition Government, tough and protracted negotiations inevitably lie ahead. However, in view of the latest positive revenue figures for September and prognosis for the whole of 2013, the CDU are likely to stand firm on their position that there is absolutely no need to raise taxes in this legislative period.

TAGS: individuals | compliance | tax | investment | tax compliance | tax avoidance | tobin tax | tax rates | Germany | individual income tax | Tax | Tax Evasion

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