Tax Looms as Battleground for German Elections

August 31, 2009 Taxation in EUTaxation in Germany  No comments

The issue of taxation is growing to be a major deciding factor in the upcoming German elections.

Tax cuts, tax overhauls, job cuts, falling balances and rising deficits, phrases that are being drawn out with progressively higher frequency in the face of the upcoming German elections. Increasingly attention is being focused on three major parties within the election: the Christian Democratic Union (CDU) headed by Chancellor Angela Merkel, the Social Democratic Party (SDP) headed by Franz Müntefering, and the Free Democrat Party (FDP) who are currently the preferred coalition partner to CDU.

Germany faces a progressively worsening economic situation, its id facing a public sector deficit of 4.7% in 2009 and an estimated 10% of GDP in 2010, and its public debt is estimated to rise from 66% to 84%. Each involved party is advocating vastly differing methods of taxation changes to correct this ailing situation. CDU is pushing for low income tax to fall from 14% to 12% and raise the high income tax bracket from €52,225 to €60,000. SDP wants a lower income bracket tax cut from 14% to 10%, a rise from 45% to 47% in the highest bracket of tax, and a financial equity transaction tax for listed stock trades of over €1,000. FDP wants a total overhaul of the tax system with simplifications of the tax bands, and total tax savings for middle and low income families totalling €35 billion. Further, FDP has vowed not to sign any coalition agreement with a party that is not willing to undergo major taxation restructuring. Current opinion polls amongst Germans put a CDU/FDP coalition as the preferred combination, garnering over 50% of the opinion vote.

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