The retraction would signal that the coalition of the centre-right Christian Democrats (CDU) and business-friendly Free Democrats (FDP) is being forced to retract, or postpone, the programme of tax cuts it promised before last September's election.
Certain products and services in Germany are subject to a reduced sales tax of 7 percent, rather than the standard 19 percent. Since January 1, one of these has been hotel stays, but the government may be forced to retract this break as state finances come under increasing pressure following several bailout packages. Raising sales tax to 19 percent on some of these services could raise several billion euros in tax revenue.
Other saving measures being mooted include reducing the commuter tax allowance and making housing benefit for the long-term unemployed a flat fee.
According to a report in Saturday's Bild newspaper, a final decision on Germany's new tax plan will be made at a conference at the beginning of June.
The CDU economic expert Andreas Lämmel also called on workers around the country to reduced their holidays for the sake of the German economy. "Every extra day of work is good for the economy and for the tax revenue," he told Bild.