Schäuble rules out tax reform before 2013

Schäuble rules out tax reform before 2013
Photo: DPA
Germany's finance minister ruled out on Monday a major overhaul of the country's complex tax system before 2013, a major election campaign pledge of Chancellor Angela Merkel's new coalition partners.

“At the end of this legislative period (2013) we will have neither a balanced budget nor a fundamentally new income tax system,” Wolfgang Schäuble told the Handelsblatt business daily in an interview.

“I consider this to be a realistic prediction. With everything that we have to deal with, this is not the time,” he said.

He added: “I am well aware of the charm of the phrase ‘simpler, lower, fairer’. But I also know that this is only possible if we proceed very carefully.”

Schäuble was named finance minister after Merkel’s re-election in September as head of a new coalition pledging to speed Germany’s recovery from its worst post-war recession with €24 billion in tax cuts.

Merkel’s new partners, the pro-business Free Democrats (FDP), campaigned in the election promising major simplification of the tax system by drastically cutting the number of tax levels.

The planned tax cuts would add to Germany’s mammoth debt pile and put Europe’s biggest economy in breach of European Union deficit rules for several years to come, though.

Meanwhile the new government has ruled out major spending cuts, with Merkel saying that this would endanger Germany’s nascent recovery and that the growth that the tax cuts will trigger will help cover some of the cost.

The plans have come under fire from all sides in the last week, including from the leaders of some of Germany’s 16 states, the Bundesbank central bank and the country’s main employers’ federation.

Schäuble, 67, a veteran conservative, admitted that he was in a “complex situation,” particularly in light of a constitutional amendment limiting the budget deficit pushed through by Merkel in her first term.

“Anyone who was constitution minister as long as I was will make very sure that the constitution is adhered to. And as such a dedicated European, I know that sticking to the EU stability pact is of decisive importance for Europe,” he told Handelsblatt.

“If Germany didn’t take the pact seriously, then we would really have a problem in Europe.”

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