While these are exciting times for political commentators, they are something of a nightmare for taxpayers. Governments with clear majorities tend to have clear plans, even if most of the time the plans end up being executed only partially. But unholy alliances between parties of different stripes are often the source of policy paralysis, as the various participants seeks to reconcile what can sometimes be vastly differing positions on various issues, including taxation.

Germany is an interesting one in this respect. The CDU-led Government has stubbornly refused to loosen the fiscal reins in order to build up a budgetary buffer, in spite of successive pleas by economists to show a little mercy to long-suffering taxpayers. But the CDU is about to get into bed with a party calling for an aggressive tax-cutting policy in the form of the FDP. And joining them will be the Green Party, with its own distinct ideas on taxation.

Just how this will play out is uncertain. Some tax cuts are possible, with the CDU having pledged a moderate reduction in the personal income tax burden. However, if the parties simply can’t agree at a more fundamental level, the most likely result will be little in the way of change. German taxpayers will be used to that.

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