Thursday, May 7, 2015

“Cold progression”: government wants to relieve German tax from January – THE WORLD

Wolfgang Schäuble (CDU) wants to tackle the insidious tax increase. As the Minister of Finance surprisingly announced in Berlin that reductions are already planned 1 January 2016.

“I suggest that we the problem of bracket creep now solved, “Schaeuble said at the presentation of the results for tax revenue estimates. There is as of next year financial leeway to do so. The proposal was agreed with German Chancellor Angela Merkel (CDU) and SPD leader and German Economics Minister Sigmar Gabriel. Previously, experts had said that there was no room for maneuver.

Under the “cold progression” experts understand a kind of creeping tax increase. This is the case when employees automatically slip in wage increases in a higher tax rate and possibly pay more taxes, even though the salary increase of the general inflation is consumed.



purchasing power of citizens strengthen

Schäuble wants to shift the tax rate from 2016 in the amount of the price increase in the past two years to the right to access higher tax rates at higher income. The small tax reform would cost the federal government, states and municipalities in total annually 1.5 billion euros in revenue.

Because of the current low level of inflation the relief of the citizens should however not very big to fail. Schäuble stressed him go there to the principle. However, countries need to play in the foray. He assumes that the solution “states and municipalities will not overwhelm”, Schäuble said.

According to Federal Minister Sigmar Gabriel (SPD) is the Tax Relief strengthen the purchasing power of citizens. “The economic upswing in Germany has to arrive at the workers,” he said in Berlin trade unions and social democrats have this step demanded for a long time.



Correction of previous estimates

The reason for the plans is an increase in tax revenues of the federal government, states and municipalities. These take thanks to the good economic and employment situation by 2019 38.3 billion euros more taxes than previously expected.

This year alone, the expect Treasury with an additional Plus in comparison to tax estimate of November from 6.3 billion euros. The trend has also continued in the following years.

The bottom line is the tax revenue of the state to rise even more. Because with the now to be determined additional Plus is just about the correction of the previous estimate.

This year, 666.5 billion euros are expected. By 2019 the total tax revenue could then climb to 768.7 billion euros.

“The fact that the trend in tax revenue as enjoyable, is due in large use of workers, “said Gabriel. The tax relief will now contribute in addition to higher pay settlements to the fact that the disposable income further increased.

The deputy chairman of the CDU / CSU parliamentary group, Ralph Brinkhaus , defined the fiscal consolidation and the reduction of “cold progression” as a top priority, “new leeway for additional requirements do not exist.”

He also saw therefore the countries in the duty: “We now expect the countries that the additional funds be used for fiscal consolidation and to strengthen local financial strength.”

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