Finance Ministry unveils €10 billion tax relief plan to ease the burden of inflation

As inflation rapidly eats away at people’s disposable incomes, Germany’s Federal Ministry of Finance has unveiled a new set of tax relief measures to help ease the burden. Among other things, Finance Minister Christian Lindner wants to raise the basic allowance and the income thresholds for taxation, and increase child allowances. However, the proposal has already come under heavy criticism.

Lindner unveils proposed tax relief to offset inflation in Germany

“We are in a situation where action must be taken,” Lindner told a press conference on Wednesday, justifying his plan to cut taxes by a total of more than 10 billion euros next year. He pointed out that with inflation driving up the price of everything from food to energy, “everything else would not only be unfair, but also hurt our economy.”

Lindner’s plan – which he expects will benefit 48 million people “in the middle of society” – is designed to help ease the burden of rising inflation. Rather than cutting taxes directly, the proposal is to raise tax thresholds, thereby reducing the average citizen’s tax burden by €192. “Employees and low earners, retirees and self-employed, students with taxable part-time jobs and above all families benefit,” Lindner wrote in a guest post for FAZ.

Government plans to raise tax thresholds and increase child benefits

From 2023, the Ministry of Finance would therefore increase the basic allowance – under which no tax is paid on income – from 10,347 euros to 10,632 euros. It would rise in 2024 to 10,932 euros.

The high tax rate of 42%, which is currently payable on income above €58,597, will only apply to income above €61,972 in 2023 and €63,521 in 2024. However, the threshold of the maximum tax rate of 45% will remain in effect. up to 277,826 euros.

Lindner also confirmed that he plans to increase child benefit rates from 2023. Families would receive an additional €8 for their first two children from next year, bringing the total benefit to €227 per year. child and per month. For the third child, the parents will receive 2 euros more (227 euros per month), and for the fourth child the benefit will remain the same at 250 euros. From 2024, parents would receive an additional 6 euros per month for each of their first three children.

In total, the plans would see tax revenues fall by €10.12 billion in 2023 and €17.5 billion in 2024.

Tax relief would benefit the wealthy the most, critics say

Lindner’s plans have already been attacked by figures inside and outside government. The FDP’s coalition partner, the Greens, notably criticized Lindner’s proposal as “outdated” and “socially unbalanced”, saying it benefits the highest earners above all else.

“High and highest income groups would receive more than three times as much [relief] as low-income people, who actually need it most urgently,” Greens parliamentary group leader Andreas Audretsch told AFP. dpa. Financial policy spokeswoman Katharina Beck added in a statement to RND“It should be the other way around: strong shoulders should carry more than low-income ones and not be disproportionately relieved.”

Ulrich Schneider, of the social organization Paritätischer Wohlfahrtsverband, said Lindner’s proposal would benefit the wealthy and set “completely wrong priorities”. He said it would “even increase the already striking income inequality in Germany”.

Berlin SPD Mayor Franziska Giffey said Papule that tax cuts and general increases in family allowances were not the kind of targeted relief measures that the current situation demanded, while leftist President Martin Schirdewan told PA that Lindner’s proposal was an “expression of a deeply questionable financial policy”. He claimed that 90% of the 10 billion euros would go to the top 30% paid.

Other figures have questioned why Germany has walked away from proposals to impose an excess profit tax on big international companies profiting from the current crisis. For example, the UK recently imposed a 25% “windfall tax” on oil and gas companies that rake in huge sums.

FDP General Secretary Bijan Djir-Sarai dismissed criticism from the Greens in particular as unfounded, reiterating that the adjustments were aimed at reducing the “tax burden of average workers” and stressing that the amount of relief was capped for high incomes. “The relief is fair and necessary so that people get a pay or salary increase despite high inflation and don’t have to pay a higher tax burden,” he said. dpa.

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