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Schaeuble sees room for more German tax cuts after September election
July 1, 2017 / 12:45 PM / 5 months ago

Schaeuble sees room for more German tax cuts after September election

BERLIN (Reuters) - German Finance Minister Wolfgang Schaeuble said in a radio interview to be broadcast on Sunday that there could be room to cut taxes by more than the 15 billion euros already announced after the Sept. 24 election.

German Finance Minister Wolfgang Schaeuble attends at an event of his CDU party's economic council (Wirtschaftsrat) in Berlin, Germany, June 27, 2017. REUTERS/Hannibal Hanschke

Schaeuble told Deutschlandfunk radio that he hoped there could be tax relief beyond that already promised 15-billion euro income tax cut. The conservative Christian Democrats will present details on that with their campaign platform on Monday.

”We’re planning, all in all, to do more than just correcting the income taxes by 15 billion euros,“ he said, referring to plans to reduce the country’s ”cold progression“ tax increases -- or ”clandestine tax increases. Germany does not adjust tax brackets for inflation, unlikely many other countries.

Schaeuble said that aside from fighting “cold progression”, the Christian Democrats want to support young families to build new housing while also supporting research and development for small- to medium-sized companies.

He said he would like to start dismantling the so-called “Solidarity Tax” in 2020 that was introduced after German unification to help pay for the costs of rebuilding infrastructure in formerly Communist East Germany.

Schaeuble has rejected criticism that the income tax cuts of 15 billion years a year were too low to significantly boost economic growth through consumption.

Economists and business lobby groups inside and outside Germany have demanded an overhaul of Germany’s tax system, namely steeper tax relief that would boost consumption and growth and a lower corporate tax rate that would encourage private investments.

The International Monetary Fund and European Commission have said that Germany has room to lift investments on hard and digital infrastructure, which would help reduce its current account deficit and benefit weaker euro zone peers.

Germany invested about 2.2 of output on roads, bridges schools and kindergarten each year on average between 2005 and 2014, significantly lower than the average of 3.3 percent among members of the Organisation for Economic Co-operation and Development (OECD).

A recent study by the Bertelsmann Foundation think-tank found that if Germany boost investments to the OECD average, its economy would grow 1.6 percent each year on average until 2025 -instead of 1.4 percent if investment levels remain at their current level - and tax revenue would grow by 80 billion euros.

Schaeuble has said he prefers to use the higher tax revenues made possible thanks to steady growth fueled by consumption, a robust labor market, a booming construction sector and higher state spending to reduce public debt.

Reporting by Erik Kirschbaum Editing by Jeremy Gaunt.

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