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Kohl’s ambitious tax reform plan dies
BONN. Sept 26: Parliament early Friday gave up eilorts to agree on an ambitious tax cut run. burying a centrepi«‘ee of hancellor Helmut Kohl’s efforts to reform the German economy, reports AP.
Months of partisan deadlock were confirmed in five hours of talks on the government's plan to slash corporate and personal income taxes to postwar lows, touted by Kohl as a way to boost investment and create jobs.
The opposition Social Democrats rejected the plan, which they said would give high earners too much relief and would increase the budget deficit.
"The tax reform has failed because the governing coalition offered no new concept." Social Democratic chief negotiator Hans Eichel told reporters after the session of a mediation committee of both houses of parliament, which began late Thursday.
Each side accused the other of blocking an overhaul of Germany's complex and burdensome tax system, now set to become a campaign issue for national elections next September.
"Now the voters will decide" on which model they prefer, said Erwin Huber, a negotiator for the Christian Social Union, the Bavarian sister party of Kohl's Christian Democratic Union.
The tax impasse and delays in other welfare state reforms have created a sense of malaise about Germany's ability to face the challenge of the global
economy.
Kohl's governing three-party coalition had passed the 30 billion mark (16.5 billion dollars,). ' tax cut in the lower house of parliament, but the opposition-dominated upper house blocked it.
A previous attempt by parliament's mediation committee to find a compromise failed last month.
The government's plan called for lowering the minimum personal income tax rate to 15 per cent from about 26 per cent. The highest personal tax rate — for incomes of 90.000 marks (53.000 dollars) or higher — would have dropped to 39 per cent from 53 per cent.
Tax rules also would have been simplified and loopholes closed.
Since the government unveiled its tax proposals in January. it has agreed with the opposition only on scrapping a tax on business capital that provided revenue for communities.
Adding to Friday's failure was an embarrassing rift inside the government.
Kohl's coalition was divided over whether to raise other taxes — such as the value-added sales tax or the energy tax — to make up for cuts in payroll taxes proposed by the opposition.
In the latest meeting, the Social Democratic majority on the mediation panel passed its own plan for lowering payroll taxes and increasing the two other levies.