Higher Investment for Digitalization, Reduce Income Taxes: Germany’s Scholz

Germany intends to employ higher-than-anticipated tax revenues to increase investment in the digital economy while reducing the tax burdens for laborers with small and medium incomes for 2018, as per Finance Minister Olaf Scholz told yesterday. Scholz presented the updated tax evaluation for federal, regional and municipal authorities, stating that there is a limited room for spending hikes as the federal government should prepare 10.8 billion euros for further measures until 2022.

The German Finance Minister also said that the computation must be very careful due to downside risks relative to the budget such as trade war with the United States and opposing views towards Iran’s nuclear program. He further said that the administration plans to use the reserved tax revenues to begin the digitalization project wherein the finance ministry will hand over 2.4 billion euros this year. While the fund will further grow due to revenues produced through G5 mobile licenses auction.

In 2019, Scholz plans to cut income taxes specifically for workers who have small and medium wages through offsetting the ‘cold progression effect’  within the tax system of Germany. This would mean that tax bracket will not be adjusted for inflation. German progressive tax system does not adjust automatically compared with other major economies such as Britain, France, and United States. With this, the Organization for Economic Cooperation and Development (OECD) encouraged Germany and other countries to implement tax bracket indexing.