The German Finance Ministry said Thursday that government tax revenue will be lower than expected in 2024, adding to the challenges facing Chancellor Olaf Scholz’s government.
Berlin will take in €30.8 billion ($33.6 billion) less than expected in the coming year, the ministry said in a biannual estimate.
German Finance Minister Christian Lindner said the drop in income was due to recent tax relief measures intended to help citizens cope with inflation and the rising cost of living.
Lindner denied the tax, but urged fiscal restraint
Lindner praised the government’s efforts to return money to individuals and businesses during a tough economy.
At the same time, Lindner said that Germany has no problem with tax revenue: “We are a high-tax country.”
The leader of the business-focused Free Democratic Party said Berlin must tighten its belt and curb new spending.
Chancellor Olaf Scholz’s promise to increase the German defense budget by €100 billion amid Russia’s war in Ukraine and the investments needed to tackle climate change has complicated Germany’s budget outlook.
“Instead of constantly inventing new spending programs, we should return to a stability and supply-based fiscal policy,” said Lindner.
The finance minister is particularly eager to fulfill an election promise to restore the so-called “Schuldenbremse” (debt brake), enshrined in Germany’s Basic Law or constitution.
The rule, which limits Germany’s debt-to-GDP ratio, was suspended in 2020, as the government took fiscal action to boost the economy amid the COVID-19 pandemic.
Tensions within the coalition
Lindner’s statements urging fiscal restraint could put him at odds with two other parties in Germany’s ruling coalition, the center-left SPD and the environmentalist Greens.
The SPD and Greens are fighting against cuts to social programs in the next budget. The Greens in particular are calling for new investments in the transition to a more climate neutral economy.
The FDP also rejects tax increases to finance new investments or government programs, due to the negative impact on the economy.
The three parties struggled to reach a compromise on the issue, with Lindner saying that a decision expected on the budget set for June 21 should be returned.
Meanwhile, the conservative opposition Christian Democratic Union (CDU) criticized the government’s “lethargic” budgetary policy.
Christian Haase, a CDU member who sits on the Bundestag’s Budget Committee, also mocked the SPD and Green as “utopians” who must be stopped.
wd/jcg (Reuters, AFP, dpa)
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