German parties agree tax reform plan

Greens rebuffed over immediate ecological tax reform; win small petrol price increase

Germany's Social Democrat (SPD) and Green election victors moved forward in talks designed to lead to a new coalition government this week, and agreed the broad outlines of a tax reform package yesterday. Green demands for a large scale ecological tax reform, including large rises in taxes on energy in general and petrol in particular, were rebuffed by the SPD but are likely to be fought over again once the two parties begin to govern. Having earlier endorsed a six pfennig rise in petrol prices, the SPD appears to have conceded a slightly higher increase, perhaps of the order of ten pfennigs. This will not satisfy the Greens, who want to see a tripling in petrol prices over ten years (ENDS Daily 1 April). In keeping with the ecological tax reform concept, whatever energy tax rises are eventually agreed will be used to cut payroll taxes, which fund pensions and unemployment benefits, the parties said at the end of yesterday's talks. Green leader J├╝rgen Trittin told newspapers that the plan would enable the ratio of employment taxes to wages to be reduced from 42.3% to 40% over the next four years. Talks between the parties on other dossiers are continuing, and are due to be completed before the end of the month.

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