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ECONOMY

New wave of tax relief comes into force

The New Year ushered in a tax relief package in Germany worth several billion euros, the first realisation of a campaign pledge made by Chancellor Angela Merkel's new government.

New wave of tax relief comes into force
Photo: DPA

All German income tax brackets changed on January 1, substantially relieving many citizens. The bracket for the top 42 percent rate of income tax was raised from €52,552 to €52,882 a year, while the top tax-free income deduction was raised from €7,834 a year to €8,004 for single people.

The lowest income tax rate of 14 percent now applies to those earning €8,005 and more. On top of this, certain health and care insurance payments can now be set off against tax.

Siblings, nieces and nephews have been relieved of inheritance tax, and sales tax for hotel stays has been reduced from 19 percent to 7 percent. Considerable reforms in business tax have also come into force.

The annual child tax deduction has been raised from €6,024 to €7,008 and the government subsidy for children, Kindergeld, has been increased €20 more per child every month. The state will now pay €184 a month each for the first and second child, €190 a month for the third, and €215 each for any more children.

The annual income limit at which statutory health insurance is mandatory has also been raised from €48,600 to €49,950.

There have also been contribution increases – top-earners must now pay €18 a month more in social security contributions. This is part of a regular yearly increase in the standard bracket by which contributions are determined.

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ECONOMY

‘Tougher times’: Sweden’s economy to slow next year

Consumers in Sweden are set to crimp spending over the rest of the year, pushing the country into an economic slowdown, Sweden's official economic forecaster has warned in its latest prognosis.

'Tougher times': Sweden's economy to slow next year

A combination of record high energy prices over the winter, rising interest rates, and inflation at around 10 percent, is set to hit household spending power over the autumn and winter, leading to lower sales for businesses and dragging economic growth down to just 0.5 percent next year. This is down from the 1.2 percent the institute had forecast for 2023 in its spring forecast. 

“I don’t want to be alarmist,” Ylva Hedén Westerdahl, forecasting head at the Swedish National Institute of Economic Research, said at a press conference announcing the new forecast. “We don’t expect the sort of economic slowdown that we saw during the financial crisis or the pandemic, where unemployment rose much more. But having said that, people who don’t have a job will find it tougher to enter the labour market.” 

She said that a shortage of gas in Europe over the winter, will push electricity prices in Sweden to twice the levels seen last winter, while the core interest rate set by Sweden’s Riksbank is set to rise to two percent. 

As a result, Sweden’s unemployment rate will rise slightly to 7.8 percent next year, from 7.7 percent in 2022, which is 0.3 percentage points higher than the institute had previously forecast. 

On the plus side, Westerdahl said that she expected the Riksbank’s increases in interest rates this year and next year would succeed in getting inflation rates in Sweden under control. 

“We expect a steep decline in inflation which is going to return to below two percent by the end of 2023,” she said. “That depends on whether electricity prices fall after the winter, but even other prices are not going to rise as quickly.” 

After the press conference, Sweden’s finance minister, Mikael Damberg, said he broadly agreed with the prognosis. 

“I’ve said previously that we are on the way into tougher times, and that is what the institute confirms,” he told Sweden’s state broadcaster SVT. “There’s somewhat higher growth this year, at the same time as fairly high inflation which will hit many households and make it tougher to live.”

Damberg called on Sweden’s political parties to avoid making high-spending promises in the election campaign, warning that these risked driving up inflation. 

“What’s important in this situation is that we don’t get irresponsible when it comes to economic policy,” he said. “Because when parties make promises left, right and centre, it risks driving up inflation and interest rates even more, so Swedish households have an even tougher time. Right now, it’s important to prioritise.” 

 The call 

Sverige är på väg mot lågkonjunktur enligt Konjunkturinstitutets (KI) senaste prognos. Enligt finansminster Mikael Damberg (S) är det därför viktigt att Sverige sköter sin ekonomi ansvarsfullt och vågar prioritera.

– Jag tror att alla partier behöver vara lite återhållsamma och inte lova för mycket, säger han.

Mikael Damberg tycker att KI tecknar en realistisk bild av Sveriges ekonomiska verklighet.

– Jag har sagt tidigare att vi går mot tuffare tider och det är väl det som KI bekräftar. Något högre tillväxt i år men sämre tillväxtförutsättningar nästa år samt fortsatt ganska hög inflation som slår mot många hushåll och gör det tuffare att leva, säger han.

Och vad vill regeringen göra åt det?

– Det är viktigt att vi i det här läget inte är ansvarslösa i den ekonomiska politiken. För när partier lovar vitt och brett till allt riskerar vi att driva upp inflationen, öka räntan ytterligare och svenska hushåll får det svårare. Nu måste man våga prioritera.

Se intervjun med Damberg om konjunkturläget klippet ovan.

“Electricity prices are going to be twice as high as last winter,” said 

Elpriserna kommer att bli dubbelt så höga som förra vintern, säger Ylva Hedén Westerdahl, chef för Konjunkturinstitutets prognosavdelning, på en pressträff.
Den lågkonjunktur som KI ser framför sig kallar hon trots det för en mjuklandning. Den handlar främst om att människor kommer att ha mindre pengar att konsumera.

“Brist på gas i Europa gör att energipriserna ser ut att bli rekordhöga under vintern”, skriver KI, och ser att inflationen kommer att närma sig 10 procent.

Deras prognos för styrräntan är att den ligger på 2 procent vid årsslutet, vilket gör att inflationen faller tillbaka snabbt under nästa år och Riksbanken låter då räntan ligga still.

KI tillägger att de offentliga finanserna är fortsatt starka och de bedömer att det finns ett budgetutrymme på runt 120 miljarder kronor för de kommande fyra åren.

Vad gäller BNP spår KI en blygsam tillväxt på 0,5 procent nästa år – en nedskrivning från tidigare 1,2 procent.

Prognosen för arbetslösheten under 2023 är 7,8 procent, 0,3 procentenheter högre än tidigare prognos.

Fredrik Fahlman/TT
Johanna Ekström/TT

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