Businesses fret over delayed electronic income tax system

Germany fiscal officials are citing “technical delays” for postponing the nationwide introduction of an electronic income tax tracking system starting in 2012. The delay has some businesses grumbling.

Businesses fret over delayed electronic income tax system
Photo: DPA

Uncertainty over the new system – an electronic version of the paper Lohnsteuerkarte document employers have used since 1925 to track their employees’ wages and tax obligations – is unlikely to affect the day-to-day lives of regular working stiffs.

But it could turn record keeping at German businesses into chaos as managers figure out how best to collect tax data during the transition period that has now been extended by several months, the Handelsblatt newspaper reported on Tuesday.

The introduction of the new system, which was supposed to happen this year, has already been pushed back by the Financial Ministry several times due to technical problems.

“Businesses and employers need predictability so they can pay the income tax on January 1,” Isabel Klocke of the Federal Taxpayers Association told Handelsblatt.

Once the new system is introduced, all workers will get a new electronic record known by the clunky German abbreviation ElStAM for Elektronische Lohnsteuerabzugsmerkmale. It is supposed to mean less paperwork for everyone involved. It will also allow them to more easily control what personal information is released to employers. It will, for instance, be possible for workers to block the release of information about their new marriage.

Already, some Germans have been receiving notification of their new ElStAMs, but not without difficulties arising. In some cases married couples were registered in the wrong tax bracket among other problems, Handelsblatt reported.

“Taxpayers should check the information closely,” Reiner Holznagel a vice president at the Federal Taxpayers Association told the newspaper.

The colourful paper Lohnsteuerkarte has a long history in Germany that stretches back to 1925. But as Germany’s population has grown and business complexity has increased it has become an anachronism that many see as inefficient and out of step with changing times.

The Local/mdm

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Swedish economy to grind to a halt as interest rates kick in

Sweden faces an economic slump next year that will see economic growth grind to a complete stop, Sweden's official government economics forecaster, has warned.

Swedish economy to grind to a halt as interest rates kick in

Sweden’s National Institute of Economic Research, which is tasked with tracking the business cycle for the Swedish government, warned in its quarterly forecast on Wednesday that greater than expected energy prices, interest rate rises, and stubborn inflation rates, Sweden was facing a significant downturn. 

The institute has shaved 1.6 percentage points off its forecast for growth in 2023, leaving the economy at a standstill, contracting -0.1 percent over the year. 

The institute now expects unemployment of 7.7 percent in 2023, up from a forecast of 7.5 percent given when in its last forecast in June.

“We can see that households are already starting to reign in their consumption,” said Ylva Hedén Westerdahl, the institute’s head of forecasting, saying this was happening “a little earlier than we had thought”. 

“We thought this would have happened when electricity bills went up, and interest rates went up a little more,” she continued. 

The bank expects household consumption to contract in 2023, something that she said was “quite unusual” and had not happened since Sweden’s 1990s economic crisis, apart from in the immediate aftermath of the Covid-19 pandemic. 

This was partly down to a five percent reduction in real salaries in Sweden in 2022, taking into account inflation, which the institute expects to be followed by a further two percent fall in real salaries in 2023. 

If the incoming Moderate-led government goes ahead with plans to reimburse consumers for high power prices, however, this would counterbalance the impact of inflation, leaving Swedish households’ purchasing power unchanged. 

The institute said it expected inflation to average 7.7 percent this year and 4.6 percent in 2023, both higher than it had forecast earlier.

Sweden’s Riksbank central bank this month hike its key interest rate by a full percentage point, after inflation hit 9 percent in August, the biggest single hike since the 1990s.