Germany plays down talk of tax cuts

The German government on Wednesday played down reports that tax cuts, one of the main platforms of Chancellor Angela Merkel's allies, were back on the agenda after being shelved because of the financial crisis.
Government spokesman Steffen Seibert said there was so far no agreement within the centre-right coalition on a timetable for tax cuts, or which taxes might be lowered and by how much.
"There will be a certain point where we'll have enough of the leeway that's needed to cut taxes for lower and middle-income earners," Seibert told a news conference.
With German tax revenues surging thanks to economic recovery, and seen returning to the levels of before the 2008 financial crisis by next year, Merkel and Finance Minister Wolfgang Schaeuble have resisted calls to cut taxes in response.
Some news media contrast their willingness to put billions of euros into bailouts for euro zone members like Greece with their reluctance to cut taxes, which was a 2009 campaign promise by the Free Democrats (FDP), junior partners in the coalition.
Merkel and Schaeuble say Germany has to observe a new "debt brake" law imposing strict deficit targets.
But one parliamentary leader of Merkel's conservatives told German television he did expect some form of fiscal relief.
"There will definitely be some relief for lower- and middle -income families," Volker Kauder said when asked whether German tax revenue will also be used to benefit German taxpayers and not just for funding another bailout for debt-troubled Greece.
One German newspaper report said the tax cut would come by 2013 — an election year, when Merkel's current term expires — and would be in the single-digit billions of euros.
Kauder, along with Seibert, rejected speculation about cuts in the "solidarity charge", an additional 5.5% levy on top of income tax to finance development in the former East Germany.
Critics of this idea say it would benefit wealthier Germans as well as more modest households who are meant to be the main beneficiary of any upcoming tax relief measures.
The FDP has long lobbied Merkel's Christian Democrats for a reduction in taxes, but has yet to make good on their promise with voters. This has contributed to the FDP's slide in popularity in polls, where it now scores only 4-5%, in contrast to 14% in the 2009 election.