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ECONOMY

Boom pours tax money into treasuries

The booming economy is pumping windfall money into German government purses, with the tax intake in March a whopping 16.5 percent higher than the same month last year, media reported Monday.

Boom pours tax money into treasuries
Photo: DPA

Business daily Handelsblatt, citing government sources, reported that federal and state tax income is soaring – a fact that could fuel renewed calls for tax cuts. Similar growth in tax receipts has not happened since 2007, when the sales tax was raised three percentage points.

In the first quarter, not even counting local taxes – which are collected separately – treasuries took in €12 billion more than in the first three months of 2010.

Nearly all the relevant taxes boomed in March, Handelsblatt reported. Corporate tax revenue climbed nearly 50 percent because of soaring profits. Income tax and sales tax receipts also rose strongly.

The windfall could drive renewed efforts by the pro-business Free Democratic Party – Chancellor Angela Merkel’s junior coalition partner – for tax cuts and tax reform. The ailing party has suffered in the wake of the financial crisis because the pressure on government finances has left it unable to pursue its totem issue of tax cuts.

FDP party chairman Guido Westerwelle was last week forced to step down amid woeful state election performances and poor national poll results.

“If growth and consolidation continues this way, I see a prospect for tax relief in 2012 or 2013,” the party’s state chief in North Rhine-Westphalia, Daniel Bahr said. “We have to achieve a fair rate, so that an average earner keeps more than half a pay rise.”

Stabilizing the budget and the euro currency took precedence, however, Bahr said.

The anointed new FDP chief, Philipp Rösler, has also raised the issue of tax relief in recent days, though he has not given a time frame.

The Local/djw

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TAXES

Beskæftigelsesfradraget: What is Denmark’s employment allowance?

Denmark's government may soon announce changes to its tax reform plans, which will give all wage earners a bigger employment allowance. What is this and how will it affect foreigners' earnings?

Beskæftigelsesfradraget: What is Denmark's employment allowance?

What is the employment allowance? 

The Beskæftigelsesfradraget (from beskæftigelse, meaning employment, and fradrag, meaning rebate) was brought in by the centre-right Liberal Party back in 2004, the idea being that it would incentivise people to get off welfare and into a job.

Everyone whose employer pays Denmark’s 8 percent AM-bidrag, or arbejdsmarkedsbidrag, automatically receives beskæftigelsesfradraget. Unlike with some of Denmark’s tax rebates, there is no need to apply. The Danish Tax Agency simply exempts the first portion of your earnings from income taxes. 

In 2022, beskæftigelsesfradraget was set at 10.65 percent of income with a maximum rebate of 44,800 kroner. 

How did the government agree to change the employment allowance in its coalition deal? 

In Responsibility for Denmark, the coalition agreement between the Social Democrats, the Liberals and the Moderate Party, the new government said it would set aside 5 billion kroner for tax reforms.

Of this, 4 billion kroner was earmarked for increasing the employment allowance, with a further 0.3 billion going towards increasing an additional employment allowance for single parents.

According to the public broadcaster DR, the expectation was that this would increase the standard employment  allowance to 12.75 percent up to a maximum rebate of 53,600 kroner. 

How might this be further increased, according to Børsen? 

According to a report in the Børsen newspaper, the government now plans to set aside a further 1.75 billion kroner for tax reforms, of which nearly half — about 800 million kroner — will go towards a further increase to the employment allowance. 

The Danish Chamber of Commerce earlier this month released an analysis in which it argued that by raising removing all limits on the rebate for single parents and raising the maximum rebate for everone else by 20,300 kroner, the government could increase the labour supply by 4,850 people, more than double the 1,500 envisaged in the government agreement. 

According to the Børsen, the government estimates that its new extended allowance will increase the labour supply by 5,150 people.  

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