Germany’s Steinbrueck Says Faster Growth May Counter VAT Rise
Germany’s Steinbrueck Says Faster Growth May Counter VAT Rise
German Finance Minister Peer Steinbrueck defended the government’s plan to raise value-added tax in 2007, saying faster economic growth this year may counter the negative effects of the increase on consumer spending.
Chancellor Angela Merkel said yesterday her government’s plan to spend 25 billion euros ($30 billion) through 2009 to spur investment in construction and fund tax breaks for small companies will prepare Europe’s largest economy for an increase in the main VAT rate by 3 percentage points to 19 percent.
“I know'’ that raising VAT “could be counterproductive for growth,'’ Steinbrueck, 59, said in an interview late yesterday in Frankfurt. “But on the other hand, revenues will change and other things can compensate for it. I’d appreciate if everyone could see the whole picture.'’
Steinbrueck’s comments indicate a softening of his opposition to the VAT increase. In a meeting Dec. 6 with fellow European Union finance ministers in Brussels, he said “it’s well known that I’m not a supporter'’ of the plan.
More: bloomberg.com