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Boom pours tax money into treasuries

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Boom pours tax money into treasuries
Photo: DPA
12:15 CEST+02:00
The booming economy is pumping windfall money into German government purses, with the tax intake in March a whopping 16.5 percent higher than the same month last year, media reported Monday.

Business daily Handelsblatt, citing government sources, reported that federal and state tax income is soaring – a fact that could fuel renewed calls for tax cuts. Similar growth in tax receipts has not happened since 2007, when the sales tax was raised three percentage points.

In the first quarter, not even counting local taxes – which are collected separately – treasuries took in €12 billion more than in the first three months of 2010.

Nearly all the relevant taxes boomed in March, Handelsblatt reported. Corporate tax revenue climbed nearly 50 percent because of soaring profits. Income tax and sales tax receipts also rose strongly.

The windfall could drive renewed efforts by the pro-business Free Democratic Party – Chancellor Angela Merkel's junior coalition partner – for tax cuts and tax reform. The ailing party has suffered in the wake of the financial crisis because the pressure on government finances has left it unable to pursue its totem issue of tax cuts.

FDP party chairman Guido Westerwelle was last week forced to step down amid woeful state election performances and poor national poll results.

“If growth and consolidation continues this way, I see a prospect for tax relief in 2012 or 2013,” the party's state chief in North Rhine-Westphalia, Daniel Bahr said. “We have to achieve a fair rate, so that an average earner keeps more than half a pay rise.”

Stabilizing the budget and the euro currency took precedence, however, Bahr said.

The anointed new FDP chief, Philipp Rösler, has also raised the issue of tax relief in recent days, though he has not given a time frame.

The Local/djw

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