These measures include increasing the amount of family allowances.
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Germany wants to limit inflation at all costs. German Finance Minister Christian Lindner announced on Wednesday August 10 that Berlin would adopt a series of tax measures amounting to 10 billion euros in 2023 to mitigate soaring prices. This package of measures consists in particular of increasing the amount of family allowances and raising the level from which the maximum income tax rate of 42% will apply, he said.
These measures are also intended to compensate “multiplier effect”Where “cold progression”. This phenomenon describes a situation in which a person suffers higher taxation due to a salary increase, whereas this was obtained to compensate for the effects of inflation, which in fact reduces his purchasing power.
If nothing is done, some 48 million people will suffer a tax increase from January 2023 due to this phenomenon, detailed Christian Lindner. “For the state, benefiting (from an increase in tax revenue) at a time when daily life has become more expensive (…) is not fair and also dangerous for the economy”he admitted at a press conference.
“For many people, everyday life has become much more expensive. We fear an increase in gas, energy and food prices, he explained. The economic prospects of our country have also become more fragile and the forecasts for economic growth must be revised downwards”.