To Germany now. And what’s this? A proposal by the Finance Minister to cut taxes? There must be an election coming up! And indeed there is. Elections to the Bundestag, the lower house of parliament, are due to take place no later than October 2017, and the seemingly unflappable, rock-like Angela Merkel is perhaps facing the first ratings crisis of her long stint in power.

Germany has a budget surplus and is therefore well-placed to afford tax cuts. But while the EUR15bn (USD16.9bn) figure mentioned by Finance Minister Schäuble looks impressive, tax cuts worth that would be equal to just 0.4 percent of Germany’s USD3.5 trillion gross domestic product – they’re small fry, in other words.

It’d be unwise to expect a reversal of Germany’s policy of fiscal responsibility and restraint. The migrant crisis has pushed up expenditure, and Germany remains ever-conscious of its role as the stable foundation at the heart of the eurozone’s fragile economy. Germany has a high tax burden, but there is no reason to suppose that the Government, whether a CDU one, a SPD one, or another coalition, will embark on a tax-cutting spree, especially where corporate taxpayers are concerned. The advantage of a policy of stability is that at least taxpayers know where they stand. Although any tax cuts that can be squeezed out of the Government will be a bonus.

For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look

Germany