Brüderle raises 2010 growth forecast

Economy Minister Rainer Brüderle on Wednesday said Germany will grow more than expected this year, raising the government's growth forecast to 1.4 percent from a previous estimate of 1.2 percent.

Brüderle raises 2010 growth forecast
Photo: DPA

Brüderle said he was “cautiously optimistic” for the future economic prospects of Germany, which recently lost its crown as the world’s top exporter to China, but warned that uncertainty was still high.

“We have got past the trough, but the way back up will be slow and painful,” the minister added.

Last year, Europe’s largest economy suffered its worst slump since World War II, with a contraction in output of five percent. The country is also saddled with a mountain of debt and expects a record €85.8 billion ($120.7 billion) in new borrowing this year.

But forward-looking indicators recently have pointed to brighter times ahead, with the closely watched Ifo survey of business confidence rising for 10 consecutive months.

Exports, the backbone of the German economy, were expected to grow by 5.1 percent this year, according to the new projections, compared to a crisis-driven contraction of 14.7 percent in 2009. However, Brüderle cautioned that “the pre-crisis levels will not be reached this year.”

Unemployment was not expected to rise above the politically sensitive four million mark, Brüderle said, estimating an average of 3.77 million for 2010.

Despite the hike in the growth projection, Berlin is still more pessimistic than either the International Monetary Fund or the German central bank, which have forecast 1.5 percent and 1.6 percent respectively.

Jennifer McKeown, senior European economist at Capital Economics, was even more bullish, predicting: “With exports again performing much better than elsewhere, we see the German economy expanding by a solid two percent.”

Analysts at Germany’s biggest private bank, Deutsche Bank, expect even stronger growth of 2.1 percent.

The new centre-right coalition in Berlin – Chancellor Angela Merkel’s conservative Christian Democrats and the pro-business Free Democrats – has vowed to implement deep tax cuts in a bid to boost consumer spending.

But weighed down by the growing debt mountain, the tax cuts have proved politically tricky to push through, with Merkel’s own finance minister warning that the country will have to tighten its belt in 2011.

After much wrangling, a first €8.5-billion tax relief package eventually cleared its final legislative hurdle in late December. The coalition has promised a total of €24 billion by 2013.

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EXPLAINED: The German property tax declaration owners need to know about

Property owners in Germany will have to send the tax office an updated declaration of their property values this year, to help calculate a new amount they’ll have to pay in tax. We explain what they’ll have to do.

EXPLAINED: The German property tax declaration owners need to know about

People owning property in Germany, from individuals who might own their home to commercial landlords, may have recently come across advisories from tax consultants or media stories, telling them they’ll have to submit a new declaration to the tax office as to their property’s value.

Interactions with German bureaucracy – especially the tax office – can be intimidating, but there’s a few easy steps to follow if you have to declare.

Who has to declare, when – and why?

In 2018, Germany’s highest court declared the country’s current laws on property tax (known as Grundsteuer) unconstitutional, partly because the property values currently used to calculate what an owner owes are seriously out of date.

West German properties were last assessed for tax purposes in 1964, and East German ones in 1935.

The constitutional court gave the government until the end of 2019 to come up with a new way of calculating the tax for Germany’s 36 million properties.

That’s why owners are being asked to send in new declarations, based on values as of January 1st 2022.

The tax office will then use those declarations to determine what new tax rates owners will have to pay for their properties. Although they may end up having to bear some of costs of higher property tax later, tenants don’t have to declare anything – just owners.

Owners have between July 1st and October 31st of this year to send in updated information electronically to the tax office.

READ ALSO: Update: What you need to know about the German property tax reform that affects us all

What information do I need?

Each of Germany’s 16 federal states are allowed to have slightly different regulations in the property tax reform, so be sure to check what specific regulation governs you. That said, a few key documents will help you to provide an updated property value to submit.

Extract from the land register (Grundbuchauszug): For people who purchased their property prior to January 1st 2022, this may be the best option to get the most up to date valuation possible that the tax office will accept. The federal government’s dedicated website on the updated property tax declaration also strongly recommends you have this document in particular. You can get this record by making an appointment with your land registry office, or Grundbuchamt. Each individual district, or Bezirk, will have one. You often have to make appointments with them beforehand to request documents, so call them up or email them to request a time.

Last assessment notice (Einheitswertbescheid), purchase contract, or construction documents: A few other documents, particularly for more recent purchases, will help you fill in the declaration. Construction documents may have been included with your purchase contract, and your local tax office will have sent you an assessment notice after you took possession of your property.

These documents will help you answer a few key questions on the electronic declaration, including what year the property was built, its size, number of parking spaces or renovation year. All of these will end up being relevant for the final declaration.

When will the new rate come into effect?

Tax experts say it may take until late 2024 for the new rates to be calculated. The federal government will decide on a base before each individual state may adjust their rate slightly through state law. That’s why it might take some time to tell owners what their new rates will be, with them expected to come into effect on 1 January 2025.

Until that date, owners can continue paying what they are currently paying with no changes.