Germany To Slash Personal Taxes

July 4, 2011 Taxation in Germany

Tax Cuts in GermanyAs Germany sees an improvement to its economic conditions, the country’s policymakers are looking to slash personal taxes rates within two years.

As it was announced in a press release on June 3rd, the Germany’s three coalition parties are set to introduce a new legislative proposal on June 6th, to lower personal income tax rates from January 2013.

The tax cut is being supported by the leading Christian Democrats (CDU), and its coalition parents the Free Democrats (FDP) and the Christian Social Union (CSU). The exact size of the proposed cuts was not revealed yet, with full details expected to be released on June 6th. However, according to a joint statement made by Chancellor Angela Merkel, CSU leader Horst Seehofer and FDP head Philipp Rösler, the proposal is aimed at providing tax relief specifically for lower and middle income families, and lessening “fiscal drag”. According to forecasts made by analysts, the tax breaks will be worth several billion Euros, but will not exceed EUR 10 billion.

Tax cuts have been a contentious issue in the German parliament this year, with debates raging over the economic feasibility of reducing the national tax take. The coalition parties have been arguing that the country’s current levels of economic growth can justify up to EUR 10 billion in overall tax cuts while still slashing the budget deficit. According to the press release, the new round of cuts, “…are an important precondition for more consumption and investment. Domestic demand will be strengthened, making tax policy growth policy.”

Photo by World Economic Forum