CDU/CSU angry over planned 'wealth tax'

7th November 2005, Comments 0 comments

7 November 2005, BERLIN - Senior members of designated chancellor Angela Merkel's Christian Democrats expressed anger over a planned wealth tax as talks for a grand coalition were due to resume later Monday.

7 November 2005

BERLIN - Senior members of designated chancellor Angela Merkel's Christian Democrats expressed anger over a planned wealth tax as talks for a grand coalition were due to resume later Monday.

Tax hikes to ease Germany's budget deficit and rising debt are being given a high priority by Merkel whose Christian Democratic alliance (CDU/CSU) is negotiating with outgoing Chancellor Gerhard Schroeder's Social Democrats (SPD) to set up a government.

Value added tax (VAT) will rise to at least 18 per cent and possibly even 20 per cent from the current rate of 16 per cent, under an agreement between Merkel and the SPD.

Media reports say Merkel has also approved a new "wealth tax" aimed at Germany's 120,000 richest people.

The tax, which has long been demanded by left-wingers in the SPD, would impose a 45 per cent income tax (instead of the current 42 per cent maximum) on singles with an annual income of 250,000 euros (295,000 dollars) and married couples earning over 500,000 euros.

"Those who earn more can and must contribute more," said Franz Muentefering, the outgoing SPD leader who will be labour minister and vice-chancellor in the new government.

Muentefering, in a Bild newspaper interview, said his party would only approve a VAT tax rise if accompanied by a wealth tax.

Economists have criticized the tax because there are numerous loopholes used by the rich to avoid paying taxes and because it will be difficult to administer and is only expected to raise 1.2 billion euros a year.

CDU Premier of Lower Saxony state, Christian Wulff, expressed anger over both the wealth tax and the proposed 20 per cent VAT.

"We cannot accept it," said Wulff.

Markus Soeder, secretary general of the Bavarian Christian Social Union (CSU), agreed, saying: "Both cannot be explained economically."

There are fears that a VAT increase will further dampen Germany's already weak domestic demand for goods and services.

Merkel and SPD leaders were due to resume negotiations for a coalition accord late Monday.

The grand coalition deal is supposed to be concluded by the end of this week and formally approved by the three parties on November 14.

Merkel - if all goes according to plan - will be formally elected chancellor by the German parliament on November 22.

DPA

Subject: German news

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