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ECONOMY

Strong economy puts Germany in surplus

Germany's public finances are back in the black for the first time since 2007, as the federal, state and social security budgets all reported surpluses in the billions for 2014.

Strong economy puts Germany in surplus
The better the economy does, the more cash the government has. Photo: DPA

The federal statistics office Destatis revealed on Tuesday that the total surplus had reached €6.4 billion, included of €2.3 billion in the federal government, €3 billion for social security and €1.6 billion for the states.

Only communities, the lowest level in Germany's administrative system, had a deficit, at around €700 million.

There is still some way to go before the surplus matches 2007 levels of €9 billion.

But 2014's figure is a huge improvement over 2013, which saw the public purse €7.2 billion in the red.

Overall income from taxes and social security contributions grew by 3.7 percent in 2014 compared with the previous year, to €1,245.9 billion.

While the statisticians' original prediction had been for a surplus of around €18 billion, they said that the difference was due to changes in their calculations.

SEE ALSO: Strong economy shrinks debt as share of GDP

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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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