German coalition agrees to new wealth tax

2nd May 2006, Comments 0 comments

2 May 2006 , BERLIN - Having agreed to a string of controversial measures including the launch of a new tax on the rich, leading members of German Chancellor Angela Merkel's government launched moves Tuesday to hammer out a blueprint for health reform and corporate tax cuts.

2 May 2006

BERLIN - Having agreed to a string of controversial measures including the launch of a new tax on the rich, leading members of German Chancellor Angela Merkel's government launched moves Tuesday to hammer out a blueprint for health reform and corporate tax cuts.

At a marathon meeting Monday, leaders of Merkel's Christian Democrat-led conservative bloc and the Social Democrats resolved to launch the new wealth tax on January 1 next year while agreeing to a new 12-month system of financial support for new parents which includes an option of extending it by two months.

In agreeing to increase the tax rate for single people earning more that 250,000 euros (500,000 euros for married couples) to 45 per cent from 42 per cent, the two parties comprising Merkel's grand coalition laid aside growing tensions within the government over the proposed changes.

The launch of the wealth tax will also coincide with the introduction in January next year of the government's deeply unpopular plans to raise the nation's consumption tax from 16 to 19 per cent.

Both the SPD and Merkel's political bloc hailed the agreement as representing a major change in support for families with Family Minister Ursula von der Leyen (CDU) describing the assistance plans as an important foundation block for a new family policy in Germany.

At the same time, SPD general secretary Hubertus Heil said that the agreement on the wealth tax demonstrated the negotiating ability of the two coalition partners.

In the meantime, health officials are to consider in the next two to three weeks the financial state of the health system and the scope for savings before details of a reform plan are drawn up in the coming months.

Concerned about the impact of the so-called wealth tax on small businesses and the upswing underway in the German economy, Merkel's supporters had argued for the moves to hike the tax scale, which is a project close to the SPD's heart, to be delayed for a year.

"There will be no tax on the rich that represents a burden to the economy," Merkel told industry leaders last week.

In the end, the new tax is to include special exemptions for businesses with government officials now preparing the ground for a corporate tax reform plan to be introduced in 2008.

There had also been tension between the two coalition partners on the length of time for the financial assistance to a maximum of 1800 euros a month for new parents.

The plan is aimed at parents taking time off work following the birth of their child and is seen as helping the country to tackle its low birth rate.

Copyright DPA with Expatica

Subject: German news

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