Angela Merkel vows no new taxes for Germany

21st August 2006, Comments 0 comments

21 August 2006, BERLIN - Chancellor Angela Merkel said Monday her government did not plan any new tax increases other than next year's already approved value added tax hike. "Given the current situation I view tax increases as the wrong signal ... more tax rises are not the right answer," said Merkel at a news conference. Merkel dismissed calls to cancel the planned January 1, 2007 increase of VAT to 19 per cent from the current 16 per cent. "Nothing will be changed with VAT," she said shrugging off higher

21 August 2006

BERLIN - Chancellor Angela Merkel said Monday her government did not plan any new tax increases other than next year's already approved value added tax hike.

"Given the current situation I view tax increases as the wrong signal ... more tax rises are not the right answer," said Merkel at a news conference.

Merkel dismissed calls to cancel the planned January 1, 2007 increase of VAT to 19 per cent from the current 16 per cent.

"Nothing will be changed with VAT," she said shrugging off higher than expected government tax revenues for the current year.

Some economists warn the sales tax increase will cut already weak domestic demand in Germany. GDP is expected to grow by up to 2 per cent this year but analysts project growth of only 1 per cent in 2007

Turning to the general economy, Merkel said Germany's 4.3 million people who were jobless remained the government's biggest problem.

Unemployment in Germany is currently 10.5 per cent and has been stuck at high levels since the mid-1990s.

But Merkel insisted the German economy was bouncing back thanks partly to improved global growth but also due to tough medicine such as her government's moves to cut debt and reduce non-wage labour costs.

"Germany is no longer seen as the sick man of Europe," she said, noting that the number of bankruptcies had fallen sharply during the current year.

Merkel praised labour market and other reforms passed despite great opposition under her predecessor, Gerhard Schroeder.

But while pledging to continue her government's economic triad of "repairing, investing and reforming", the Chancellor did not reveal any details of similar bold moves to boost Europe's biggest economy.

Merkel was elected last November at the head of grand coalition alliance linking up her Christian Democratic alliance (CDU/CSU) with Schroeder's Social Democrats (SPD).

DPA

Subject: German news

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