Schauble eyes ma­jor tax cuts end-2017

Financial Mirror (Cyprus) - - FRONT PAGE -

Ger­many’s Fi­nance Min­is­ter and Chan­cel­lor An­gela Merkel’s clos­est ally, Wolf­gang Schauble, said there could be room for tax cuts of up to EUR 15 bln in the next leg­isla­tive pe­riod after the Septem­ber 2017 gen­eral elec­tions.

Cam­paign­ing is get­ting un­der­way for next year’s vote and Merkel’s Chris­tian Democrats (CDU), of which Schauble is a mem­ber, have their work cut out try­ing to please vot­ers after their open-door refugee pol­icy and in­creased spend­ing on mi­grants has alien­ated some peo­ple.

The anti-im­mi­grant Al­ter­na­tive for Ger­many (AfD) party beat the CDU in a re­gional elec­tion in Merkel’s home re­gion on Sun­day, a crush­ing de­feat that she has con­ceded was due to her party’s pro-refugee stance, ac­cord­ing to the EU news and pol­icy por­tal EurAc­tiv.

Speak­ing to the lower house Bun­destag on Tues­day, Schauble said that em­ploy­ment, wages and taxes were in­creas­ing in Ger­many, while tax rev­enues were ris­ing, the Ger­man econ­omy was grow­ing and the bud­get was bal­anced.

The Mu­nich-based Ifo eco­nomic in­sti­tute said ear­lier that Ger­many’s cur­rent ac­count sur­plus will prob­a­bly hit a new record of EUR 278 bln this year, over­tak­ing that of China again to be­come the world’s largest.

Schauble said that while Ger­many would need to put funds to­wards in­te­grat­ing the hun­dreds of thou­sands of mi­grants who ar­rived last year and on do­mes­tic se­cu­rity, there would be room for ma­noeu­vre on taxes.

“After 2017, in the next leg­isla­tive pe­riod, we’ll have room to cut taxes by around EUR 15 bln,” he said. He added that these tax cuts should be aimed at peo­ple on low to medium in­comes.

Merkel has also said that Ger­mans would get tax re­lief in the next leg­isla­tive pe­riod.

Some Ger­mans, par­tic­u­larly in poorer eastern re­gions, are an­gry that the gov­ern­ment is spend­ing vast sums on mi­grants, with data on Mon­day show­ing that state spend­ing on ben­e­fits for mi­grants climbed by around 120% in 2015 to al­most EUR 5.3 bln.

Schauble also said he would seek to cor­rect “cold pro­gres­sion” or bracket creep in the tax sys­tem, from Jan­u­ary 1, 2017.

Thresh­olds in Ger­many’s pro­gres­sive tax sys­tem are not au­to­mat­i­cally ad­justed for in­fla­tion so if some­one gets a pay rise, they can find they end up with a net pay cut.

Schauble said he would aim to re­duce the bur­den caused by “cold pro­gres­sion” by around EUR 2 bln.

In July, Schauble had warned of an EUwide tax war, with states cut­ting their cor­po­rate tax rates, in the wake of Brexit and the UK’s an­nounce­ment it will cut rates to 15%.

The out­go­ing Chan­cel­lor of the Ex­che­quer, Ge­orge Os­borne, had told the

that he planned to cut the UK busi­ness rate from its cur­rent 20% to 15%, in an at­tempt to prop up the econ­omy fol­low­ing the vote to leave the EU.

How­ever, Os­borne had put no spe­cific timetable on the plan, say­ing only that Bri­tain should “get on with it” in or­der to prove the UK was still an at­trac­tive and vi­able busi­ness des­ti­na­tion out­side the bloc.

Schauble had re­sponded, “We have no in­ten­tion to start some sort of ‘race to the bot­tom’.”

A 15% cor­po­rate tax rate, if it is in­tro­duced in the UK, would be the low­est of any ma­jor econ­omy.

Ire­land’s, at 12.5%, is cur­rently the low­est in the 28-mem­ber bloc.

Ac­cord­ing to Reuters, the head of tax at the OECD had warned, in an in­ter­nal memo, that the fall­out from Brexit “may push the UK to be even more ag­gres­sive in its tax of­fer” but that fur­ther steps in that di­rec­tion “would re­ally turn the UK into a tax haven type of econ­omy”.

Berlin is plan­ning to keep its bud­get bal­anced or in sur­plus at least un­til 2020.

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