Germany has scope to cut taxes by around €15 billion after the country’s federal election in September 2017 despite increased spending on migrants, Finance Minister Wolfgang Schäuble said today (6 September).
Campaigning is getting underway for next year’s vote and Chancellor Angela Merkel’s Christian Democrats (CDU), of which Schäuble is a member, have their work cut out trying to please voters after their open-door refugee policy has alienated some people.
The anti-immigrant Alternative for Germany (AfD) party beat the CDU in a regional election in Merkel’s home region this weekend, a crushing defeat that she has conceded was due to her party’s pro-refugee stance.
Speaking to the Bundestag, Germany’s lower house, Schäuble stressed that employment, wages and taxes were increasing in Germany while tax revenues were rising, the 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 €278 billion this year, overtaking that of China again to become the world’s largest.
Schäuble 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 – at a time when a series of attacks on civilians have left Germans on edge – there would be room for manoeuvre on taxes.
“After 2017, in the next legislative period, we’ll have room to cut taxes by around €15 billion,” he said. He added that these tax cuts should be aimed at people on low to medium incomes.
Merkel has 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 yesterday (5 September)showing that state spending on benefits for migrants climbed by around 120% in 2015 to almost €5.3 billion.
Schäuble also said he would seek to correct “cold progression” or bracket creep in the tax system, from 1 January 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.
Schäuble said he would aim to reduce the burden caused by “cold progression” by around €2 billion.