October 28, 2020

Germany will lower taxes on “high-income skilled workers”


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“No, not at all, Germany should not increase taxes during the pandemic,” said German Economy Minister Peter Altmaier in an interview with ARD Morgen Magazine in which he reviewed the economic situation and which the coronavirus has plunged into the German economy. He has even advanced that “there are reasons to reduce taxes in some areas, as in the case of skilled workers with high incomes.”

«Regarding taxes, I want to make it clear that my opinion is that taxes should not be increased during this pandemic “, he added, insisting that” Germany has benefited from having a stable tax regime for the last seven years and that is still the way. ” Altmaier added that there are reasons to lower taxes, although “Germany has to be reasonable in this regard.”

The fact that Germany is already in the electoral process, facing the general elections in autumn 2021, undoubtedly influences that the ministers, both those of the CDU as Altmaier and the Social Democrats like Scholz, think twice before burden taxpayers more. In the case of Scholz, a candidate already nominated by the SPD to succeed Merkel in the German Chancellery, Germany is even in danger that both tax policy and fiscal and budgetary policy will become an electoral instrument.

The German parliament has approved a budget for 2021 that breaks with the policy of “zero deficit”, but that contains “completely responsible” accounts, has defended the Minister of Finance Schols, who alleges that the German public accounts delve into the anti-crisis measures implemented already this year and aim to help to prepare the future. “It’s a lot, a lot of money,” he acknowledged in reference to the deficit, but it is to help stabilize the economy. It is right”. The “good financial situation” of Germany, which until 2019 had chained six years with fiscal surplus, now allows it «Actively counteract» the consequences of the crisis, act «strongly» and «in time», has argued the minister, who assures that “not acting would be still much more expensive.” About two-thirds of the 96.2 billion deficit (out of a budget of 413.4 billion) correspond to increased spending for boost packages, aid and automatic stabilizers. The remaining third comes from the fall in income from taxes.

Tax for polluting vehicles

The only tax that will rise in Germany in 2021 will be the one on the circulation of the most polluting vehicles, which sets CO2 emissions as the great enemy. The new regulation implies a significant increase for those who emit the most, and bonuses for those who emit the least, with a special one also for electricity. The most affected will be the sports and SUV models, in addition to the models equipped with plug-in hybrid technology, because they are considered as polluting or more than an alternative version of thermal combustion.

The new regulation contemplates that new cars registered from the first day of 2021 and that emit more than 95 g / km will have a surcharge of two euros for each additional gram. The updated German tax also has other provisions, such as a phased increase of up to four euros per additional gram of CO2 for vehicles with CO2 emissions above 195g / km. Vehicles whose CO2 emissions are less than 95 g / km will have an annual tax credit of 30 Euros for a maximum of five years and electric vehicles will not pay until December 31, 2025.

And the Another tax that the German government wants to raise is the one that puts pressure on digital giants like Google and Amazon. Scholz assures that the taxation of digital companies is an “urgent issue” that has “consequences” for everyone and stated that it would be a “success” if the Eurogroup could agree on a draft on this matter to propose for discussion and adoption in the OECD . Among the euro partners, however, there are different sensitivities. Luxembourg Finance Minister Pierre Gramegna warned that a unilateral action by the eurozone or the EU in this regard could harm the bloc’s competitiveness.

The German Taxpayers Federation claims to “closely monitor” the use of the promotion programs launched by the German government and is particularly critical of the state aid requested by the Ford company. “With that, the German taxpayer would support a company based in the USA, but also with 22,000 employees in Cologne, Aachen and Saarlouis”, calibrates a spokesperson, “basically, it is part of our daily work to be in contact with institutions financial and authorities. Please understand that we are not communicating further details on this. The North Rhine-Westphalia regional Ministry of Economy and the Federal Ministry of Economy have also declined to comment on the request. For Tobias Hentze, an economist at the Institute of German Economics (IW), the location of the company is not decisive because the objective of government aid is to secure jobs in the country. Tomaso Duso of the German Institute for Economic Research (DIW) arrives at a similar assessment. At Ford there is a risk that German tax money will end up in parts of the company in the US But that cannot be ruled out for German companies either. Lufthansa is an international company. With it, money could also flow abroad.

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