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Tax cuts will be moderate, says Merkel

Tax relief promised for 2013 will be moderate, German Chancellor Angela Merkel said in an interview on Sunday offering an early glimpse of a policy held dear by her pro-business coalition partners.

Tax cuts will be moderate, says Merkel
Photo: DPA

“In the fall, we will have tax income forecasts and when we know them, we will decide before the end of the year on moderate tax decreases for low and medium incomes,” Merkel said to Bild am Sonntag.

The chancellor said that the ruling conservative-liberal coalition had agreed in July on tax reductions that would take effect on January 1, 2013.

Germany holds general elections in 2013 and little indication had been given so far on the scale or type of tax cuts the government would propose.

Cutting taxes is a key policy of the junior coalition party, the Free Democrats, but Finance Minister Wolfgang Schäuble of the conservative Christian-Democratic party has resisted cuts believing that budget discipline should remain the priority.

Meanwhile, according to weekly Der Spiegel, Schäuble is about to revise the 2012 growth forecast to 2.0 percent, up from 1.8 percent previously.

“The economic rebound should continue in 2012,” Schäuble wrote in a government analysis leaked to the magazine.

However, according to the report, finance ministry experts were surprised by the fall-off in consumer demand in the second quarter this year and doubt that growth will reach above 3.0 percent for 2011.

The German economy grew just 0.1 percent in the second quarter after a sharp gain of 1.3 percent in the first as the broader European economy slumped, caught up in the eurozone debt crisis.

AFP/bk

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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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