Coalition forced to weigh up tax hikes

German taxpayers face extra burdens as the federal government considers tax rises to tackle the gaping budget deficits forecast in the years ahead, a media report said Friday.

Coalition forced to weigh up tax hikes
Photo: DPA

Business daily Handelsblatt quoted an unnamed government source as saying that a limited group of taxpayers might have to accept paying more.

“It’s not about the introduction of a new tax like the wealth tax, rather very much about the additional burden for a reasonable group of taxpayers,” the source, described as “government representative”, told the paper.

Even leaders within the pro-business Free Democrats (FDP), who have had to curb their ambitions to cut taxes and have, in the past, ruled out rises, now admit some hikes may be necessary, the paper cited sources in government circles as saying.

It was not known where any increases might be made. Previously, leaders of both coalition partners – Angela Merkel’s Christian Democrats and the FDP – have ruled out any general increase to the sales tax.

But there was talk of evening out the inconsistencies brought about by reductions on sales tax in specific product areas, Handelsblatt reported.

“Several billion euros could be saved here,” a coalition source told the paper.

However, tax rises are still strongly opposed by many in the government.

“I am absolutely against tax increases,” said Hans-Peter Friedrich, the leader of the parliamentary group of the Bavarian conservatives, the Christian Social Union. He pointed that the centre-right coalition had not spoken of tax rises for a long time.

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Germany and France extend Covid tax breaks for cross-border workers

Germany and France have agreed to extend the relaxation of tax rules for cross-border workers until the end of the year.

Cross-border workers commute by car but they can for now continue to work at home
Cross-border workers usually have to commute but can for now continue to work at home.. Photo: Fabrice Coffrini / AFP

The agreements between France and the governments of Belgium, Luxembourg, Germany, Switzerland and Italy avoids double taxation issues for anyone travelling across the French border to or from those countries in order to work.

During the pandemic, tax rules were eased to allow French cross-border employees, like their counterparts in Belgium, Luxembourg, Germany, Switzerland and Italy, to work from home without having to change their tax status.

The deals, which were established at the beginning of the health crisis in March 2020, were due to end on September 30th – and would have plunged cross-border workers still working from home because of the health crisis into renewed uncertainty over their taxes.

The latest extension of these agreements means there’s no confusion over where a cross-border worker pays their taxes until December 31st – for example cross-border workers who work in Geneva but live in France, who normally pay their taxes and social security contributions in Switzerland. 

Under normal circumstances, anyone living in France who works in Switzerland can spend no more than 25 percent of their time working from home. If they exceed this time limit, they would have to pay these tax charges tin France rather than in Switzerland, which would be much higher.

The agreements between France and Belgium, Luxembourg, Germany and Switzerland “provide that days worked at home because of the recommendations and health instructions related to the Covid-19 pandemic may … be considered as days worked in the state where [workers] usually carry out their activity and therefore remain taxable,” according to the statement from the French Employment Ministry.

In the case of Luxembourg, days worked from home because of the health crisis are not counted in usual the 29 day limit.