Berlin can live with tax shortfall, Eichel says

13th May 2004, Comments 0 comments

13 May 2004 , BERLIN - Facing a bigger-than-anticipated tax revenue shortfall in the years ahead, German Finance Minister Hans Eichel insisted Thursday that Berlin will be able to manage its budget with a combination of measures which rule out a tax increase. In a statement after taxation assessors said the public sector tax shortage will total EUR 61 billion between now and the end of 2007, Eichel said Berlin will cope while staying on course to consolidate its finances. He ruled out any consideration of

13 May 2004

BERLIN - Facing a bigger-than-anticipated tax revenue shortfall in the years ahead, German Finance Minister Hans Eichel insisted Thursday that Berlin will be able to manage its budget with a combination of measures which rule out a tax increase.

In a statement after taxation assessors said the public sector tax shortage will total EUR 61 billion between now and the end of 2007, Eichel said Berlin will cope while staying on course to consolidate its finances.

He ruled out any consideration of having to submit an auxiliary budget for 2004, saying such a step "at the moment is neither necessary nor useful".

The EUR 61 billion tax collection shortfall for federal, state and local communities projected by assessors is far higher than previous Finance Ministry estimates of EUR 50 billion.

It raises the question of how Berlin is going to plug the gap while trying to get the German economy back on its feet. Eichel spoke of a "mix" of measures.

These would include limited spending cutbacks, reducing subsidies, further sale of state-held assets and higher borrowing, Eichel said, while also raising questions about the new tax shortfall estimates.

"Just how high the budget strains will actually be cannot now be predicted," the Finance Minister said.

He said a tax increase or a further tightening of cost-cutting measures would be the wrong answer and would jeopardise an economic upturn which was not yet firmly in place.

"The tax estimate results make clear the consequences which three years of economic stagnation are having on all public budgets in Germany," Eichel commented.

According to the latest tax revenue projections, the public sector - federal, state and local - tax collections this year will be EUR 9.6 billion lower than previously projected.

In 2005, the shortfall will be EUR 15.2 billion, followed by a gap of EUR 18.4 billion and then by EUR 17.4 billion euros in 2007, bringing the four-year tax shortage to a total of EUR 61 billion.

The new projections will put the public sector under increasing pressure for more stringency measures and cost-cutting to try to keep the budget deficit within limits.

Germany has failed for the past two years to meet European Union monetary stability rules setting a 3 percent limit on the budget deficit as a percentage of gross domestic product.

DPA

Subject: German news

 

 

0 Comments To This Article