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ECONOMY

Rich call for higher taxes

Wealthy Germans are joining what is becoming a European trend: Ultra rich people saying they are willing to carry a higher tax burden in order to help the continent’s economies struggling with crushing levels of debt.

Rich call for higher taxes
Photo: DPA

Four rich individuals, including a football club owner and a famous musician, made the plea in Die Zeit weekly newspaper. They argued the extra money raised should be used to shore up German society.

“I would have no problem if the top tax rate were to be raised,” said Michael Otto, who is worth more than $16 billion ($11 billion) and heads up the massive mail order company of the same name.

Martin Kind, president of the Hannover 96 Bundesliga football club and head of a firm making hearing aids, echoed Otto’s words while adding the condition that the national debt be addressed.

“A few percentage points in higher taxes won’t make the wealthy poor,” said rock musician Marius Müller-Westernhagen.

The words echo similar statements from famed US billionaire Warren Buffet, who has called on the rich to shoulder more of the burden during tough economic times.

Sixteen wealthy French citizens, including Christophe de Margerie of oil giant Total and L’Oréal heir Liliane Bettencourt, signed a petition earlier this month, asking the government to increase their taxes. The French government has since proposed a three-percent surcharge for the country’s ultra rich.

Germany itself has a back-and-forth history of both wealthy people offering to pay more taxes and government officials criticizing their excesses.

A group of about 50 wealthy Germans called the Initiative of the Wealthy for a Wealth Tax, has been calling for higher taxes on the wealthy for some time now.

But last year, former Finance Minister Peer Steinbrück condemned what he called the “excesses” of well-off Germans, whom he said often sought to avoid taxation.

One of the questions to be addressed is how increased taxes on the wealthy should look in practical terms. Should there be higher property, payroll or inheritance taxes? Or should all of those rise?

Another question is whether rich offering to pay increased taxes really would help the economy or whether it is just a way for them to curry favour from a public increasingly frustrated in tough times.

“Maybe some are ashamed by what they earn,” said Jean-Philippe Delsol, from the Institute for Research in Economic and Fiscal Issues in France, to the New York Times.

He told the Times that higher taxes could actually discourage people from earning more money, ending up as a drain on national coffers.

The Local/DPA/mdm

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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