Bloomberg News

Kampeter Says ‘Exceptional’ German Growth Boosts Tax Revenue

November 04, 2011

(Updates with Kampeter comment in second paragraph.)

Nov. 4 (Bloomberg) -- German Deputy Finance Minister Steffen Kampeter said 2011 is an “exceptional year” for economic growth that’s boosted tax revenue, though Germans shouldn’t expect the same rates of increase in coming years.

Growth this year has generated more than 16 billion euros ($22 billion) in extra revenue than was predicted in May, Kampeter told a press conference in Berlin today. The 2011 results can’t be extrapolated because the economic expansion is weakening, he said.

While the government mustn’t lose sight of its goal of balancing the budget by 2016, there’s scope to reduce income tax for low and medium earners, Kampeter said. Finance Minister Wolfgang Schaeuble said Oct. 20 the government plans to pare income tax by as much as 7 billion euros a year from 2013. The cuts aim to restore to workers some of the increased income-tax revenue resulting from higher wages, Schaeuble said.

“Irrespective of the debate on the situation in Europe, and considering aspects of fairness and creating incentives, it’s justified” to implement the tax cuts decided on by the government, Kampeter said.

Growth in German tax revenue accelerated in September, led by tax collection at the federal level, the Finance Ministry said Oct. 21, cautioning that the outlook for the economy has clouded. The European Central Bank unexpectedly cut interest rates yesterday to boost growth in the 17-nation euro region, saying a “mild recession” is on the cards as the debt crisis damps confidence.

Revenue Forecasts

Germany’s total tax revenue will be 16.2 billion euros higher than estimated in May, the government’s tax panel said today in its biannual review. Tax revenue in 2012 will be 7.4 billion euros higher than the previous forecast, while 2013 tax receipts will exceed the earlier forecast by 4.5 billion euros.

The data comprise money raised by federal, state and local taxes. The panel’s report forms the basis of government budget planning. The group is made up of university economists, experts from the Bundesbank and federal and state officials.

Kampeter said the government is sticking to its goal of reducing “cold progression,” which means employees can end up worse off when winning a pay raise because it forces them into a higher tax bracket. The deputy minister rejected a proposal to lower the so-called solidarity surcharge on income and profits, aimed at providing extra funds to eastern Germany, as it would benefit mostly those on higher incomes.

--With assistance from Hellmuth Tromm in Berlin. Editors: Eddie Buckle, Leon Mangasarian.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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