Former Merkel advisor’s tax plan unfair, CSU says

A radical tax reform plan by a former advisor of Chancellor Angela Merkel has been dismissed as unfair by her conservative coalition partners the Christian Social Union.

Former Merkel advisor's tax plan unfair, CSU says
Photo: DPA

Paul Kirchhof, an ex-Constitutional Court judge who had been Merkel’s pick for finance minister ahead of the 2005 election, announced a tax code overhaul on Monday night that includes a controversial 25-percent “flat tax” on all incomes.

The plan has won some sporadic endorsement from individual members of the pro-business Free Democrats (FDP) and Merkel’s own conservative Christian Democrats (CDU), but also fierce opposition.

But Alexander Dobrindt, general secretary of the CSU, which is the CDU’s Bavarian sister-party, told daily Die Welt’s Wednesday edition that while simplifying the tax code – as Kirchhof’s plan would do dramatically – was interesting, it would be unfair.

“The complexity of life is not reflected in this tax proposal,” he said. “The idea is exciting that a tax declaration fits on a small piece of paper. But whether it is fair is what I’m doubtful of.”

He cited the example of the commuter tax relief payment, which he said had proved itself as an effective tool but which would be scrapped under Kirchhof’s plan.

CSU deputy parliamentary leader Michael Meister praised Kirchhof’s recommendations but said the party would not adopt them.

The centre-left Social Democrats, environmentalist Greens and socialist party The Left all rejected the plan, as did the German Taxpayers’ Union.

A flat tax is a particularly controversial proposal that would benefit high-income earners, who currently pay a steeper rate on the amounts they earn within higher income brackets – the approach used by most western countries as a fair redistribution method.

Kirchhof originally proposed the 25-percent flat tax during the 2005 election campaign that pitted Merkel against former Chancellor Gerhard Schröder of the SPD. Merkel initially endorsed Kirchhof’s proposal, whereupon her approval ratings plummeted. She eventually ditched the plan and just scrapped through with a narrow victory despite her originally soaring popularity.

The Local/DAPD/djw

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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.