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ECONOMY

Businesses fret over delayed electronic income tax system

Germany fiscal officials are citing “technical delays” for postponing the nationwide introduction of an electronic income tax tracking system starting in 2012. The delay has some businesses grumbling.

Businesses fret over delayed electronic income tax system
Photo: DPA

Uncertainty over the new system – an electronic version of the paper Lohnsteuerkarte document employers have used since 1925 to track their employees’ wages and tax obligations – is unlikely to affect the day-to-day lives of regular working stiffs.

But it could turn record keeping at German businesses into chaos as managers figure out how best to collect tax data during the transition period that has now been extended by several months, the Handelsblatt newspaper reported on Tuesday.

The introduction of the new system, which was supposed to happen this year, has already been pushed back by the Financial Ministry several times due to technical problems.

“Businesses and employers need predictability so they can pay the income tax on January 1,” Isabel Klocke of the Federal Taxpayers Association told Handelsblatt.

Once the new system is introduced, all workers will get a new electronic record known by the clunky German abbreviation ElStAM for Elektronische Lohnsteuerabzugsmerkmale. It is supposed to mean less paperwork for everyone involved. It will also allow them to more easily control what personal information is released to employers. It will, for instance, be possible for workers to block the release of information about their new marriage.

Already, some Germans have been receiving notification of their new ElStAMs, but not without difficulties arising. In some cases married couples were registered in the wrong tax bracket among other problems, Handelsblatt reported.

“Taxpayers should check the information closely,” Reiner Holznagel a vice president at the Federal Taxpayers Association told the newspaper.

The colourful paper Lohnsteuerkarte has a long history in Germany that stretches back to 1925. But as Germany’s population has grown and business complexity has increased it has become an anachronism that many see as inefficient and out of step with changing times.

The Local/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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