Friday, May 11, 2018
German Finance Minister Olaf Scholz has indicated that the Government may provide limited personal income tax relief by adjusting tax brackets next year, with tax revenues expected to be higher than targeted over the next few years.
According the latest official tax revenue estimate, released on May 9, federal revenue will be EUR10.8bn (USD12.8bn) higher than forecast in the previous estimate six months ago for the period to 2022.
"We will make responsible use of the additional revenue to eliminate the effects of [bracket creep] in 2019," Scholz said upon presenting the new estimate.
However, Scholz emphasized that despite growing tax revenues, a budget surplus and a strong economy, the Government would continue to exercise fiscal restraint amid rising transatlantic trade tensions, in the process dashing the hopes of business associations calling for Germany to compete more aggressively on corporate tax after the US tax cuts.
Last month, Timo Wollmershaeuser, Head of Economic Forecasting at the Ifo Economic institute, said that the program for government agreed by the CDU and the SPD in February 2018 was "disappointing" because it avoided any mention of reforms to the income tax and social security systems, while also failing to take account of events in other countries.
"More specifically, it fails to offer any response to the clear reduction in corporate taxes in the USA, as well as in France and Britain," Wollmershaeuser said.