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Merkel rejects tax cuts, despite 'record' €54 billion surplus

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Merkel rejects tax cuts, despite 'record' €54 billion surplus
Angela Merkel. Photo: DPA
11:18 CEST+02:00
On Thursday the Finance Ministry announced that an extra €54.1 billion would roll into the German state coffers over the next five years. But that hasn't moved the Chancellor to push for tax relief.

“I think that we have to do something for those who very quickly end up in the highest tax category,” Angela Merkel told the Rheinische Post on Thursday.

She added that she saw a particular need to provide tax relief to skilled workers, whose incomes quickly push them into the top tax bracket when they work overtime.

Germany places one of the highest tax burdens in the developed world on its workers. Single childless Germans pay 49 percent of their income on taxes and social security payments, second only to Belgium.

Finance Minister Wolfgang Schäuble announced in January the he plans to have a €15 billion cut to the state's yearly tax intake after the September elections, and Merkel said that this measure was sufficient to provide relief to those who need it.

She went on to reject calls from within her own party for a yearly cut in the state's tax income by €30 billion.

At the same time, she said there would be no tax increases in the coming years.

The €54.1 billion in expected extra tax intake is for the period up until 2021 and counts taxes at the community, state and federal level. The expected surplus is a record, according to Spiegel.

In recent months Merkel's government has faced strong criticism from opponents over its refusal to deviate from its current position, which is that part of the tax surplus should be used to make a dent in Germany €1.27 trillion debt to international partners.

The Social Democrats have argued that the money should be invested in education and infrastructure, claiming paying off debts at a time of low interest rates is not good policy.

Meanwhile, the Free Democrats (FDP) have demanded tax relief, accusing the state of using taxes for its own self interest.

“The greed of the state has taken on kleptocratic characteristics,” Christian Lindner, head of the FDP, told Handelsblatt on Wednesday.

“The yearly tax intake of the state is set to be €100 billion higher in 2020 than this year, if we don't act. For the FDP it is clear that we need a turnaround in tax policy,” said the head of the party that fell out of the Bundestag (German parliament) in 2013.

"In light of the extra intake, we can have tax relief of €30 billion or €40 billion a year until the end of the decade.

“Only when the FDP are in the Bundestag will the taxpayer have an ally in politics.”

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