Smokers to pay for industry tax breaks

Smokers will cough up more money under a government plan to hike the tax on cigarettes to pay for an extension on tax breaks for heavy industry, Finance Minister Wolfgang Schäuble announced Sunday night.

Smokers to pay for industry tax breaks
Photo: DPA

Government leaders agreed at a meeting in Berlin on Sunday to water down a previously-announced plan to slash the rebate that energy-intensive industries currently enjoy on an environmental tax.

Under a savings package agreed to earlier this year, Angela Merkel’s centre-right coalition government had announced it would quickly phase out the rebate, which costs taxpayers about €1.5 billion a year.

Schäuble announced the change alongside Economy Minister Rainer Brüderle, after the ministers’ meeting in Berlin. News agency DPA reported that industry would be spared €600 million.

The coalition also agreed to simplify the tax system by 2012 and partly backdate the changes to 2011. That simplification could slash taxpayers’ burden by €500 million.

It would also mean tax returns must only be lodged every two years. The new tax plan contains about 60 proposals. Draft laws will be introduced to parliament in December.

Industry had protested fiercely against the scrapping of the environmental tax rebate. The new concession will deliver relief to small and medium-sized businesses.

Schäuble and Brüderle declined to give details as the the exact size of the tobacco tax hike. DPA reported the rise would take place in several – perhaps as many as five – stages.

The hike will be sufficiently steep, however, that it will also help finance the simplification of income tax.

The base rate at which the eco-tax relief is allowed will be raised from the current €500 to €1,000 – rather than the €2,500 previously planned. This would particularly help smaller firms, Schäuble said.

Firms will be allowed to have their eco-tax burden cut by up to 75 percent. Under the previous plan, they could have it cut by at most 80 percent next year but only by 60 percent in 2012. Previously they have been able to get it reduced by up to 95 percent.

DPA/The Local

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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.