Scholz plans tax-free one-time payment as compensation

Created: 06/26/2022, 15:35

Citizens in Germany are increasingly being financially burdened by rising energy prices.

© Patrick Pleul/dpa-Zentralbild/dpa

The federal government wants to do more to mitigate the high prices for gas, fuel & Co.

However, experts warn against a watering can from which everyone should benefit from relief.

Berlin – Sharply rising energy prices and galloping inflation: Chancellor Olaf Scholz (SPD) is planning to compensate for the possibility of a tax-free one-off payment from employers.

In return, the unions should waive part of the wage increases in collective bargaining rounds so as not to further fuel inflation, as the "Bild am Sonntag" further reports.

Corresponding plans were confirmed to the German Press Agency from government circles.

"If employers and unions agree on one-off payments to employees in order to cushion particularly difficult moments in the coming months, then the state could also supplement this in a meaningful way," said SPD parliamentary group leader Rolf Mützenich to the newspapers of the Funke media group.

The crisis is the result of the corona pandemic and logistical difficulties with worldwide deliveries, especially from China and now the war in Ukraine.

On July 4th, in a so-called concerted action, the chancellor wants to discuss with top representatives of employees and employers how price developments can be brought under control.

Lindner reacts cautiously

Federal Finance Minister Christian Lindner (FDP) reacted cautiously.

One-off payments could make sense, he writes on Twitter.

“But where companies make high profits, employer subsidies are not appropriate.

Industry-wide expansion of the Corona bonus would hardly be financially viable," noted the Minister of Finance.

Inconsistent assessments came from economists.

The director of the German Economic Institute (IW), Michael Hüther, considers the variant to be “a tried and tested instrument” in collective bargaining and salary increases in the current situation.

"Here, as with the Corona premium, the state could make these payments tax- and contribution-free, up to a maximum amount per year," he told the "Handelsblatt".

The President of the German Institute for Economic Research (DIW), Marcel Fratzscher, considers special payments from employers to be of little use because too many people would fall through the grid of the welfare state.

He said: “Higher wages and benefits are the only sustainable way for low-income people to sustain higher energy and food prices.”

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CDU leader Friedrich Merz saw little scope to compensate for the price development.

“You can do a little for everyone with energy taxes.

But that will only have a small effect.

A little more can be done for the private households in the lower income groups that are particularly affected.

We support that," he said on Deutschlandfunk.

"We will have to pay these prices, both in private households and in industry."

Government tries to relieve the population

The government is already trying to relieve the burden on citizens with the tax reduction when filling up, the 9-euro ticket, a flat-rate energy price in September/October and other measures.

Lindner will present his draft budget to the cabinet on July 1.

The debt brake, which has been anchored in the Basic Law since 2009, only allows the federal government to make new loans to a limited extent.

In 2020 and 2021, the federal government made use of the exceptional regulation to be able to temporarily suspend this instrument in emergency situations due to the high burden resulting from the corona pandemic.

In 2023, Lindner wants to comply with the debt brake again.

Bank President Christian Sewing pleaded for flexibility.

“It is important that the debt brake is adhered to in the medium term.

A government's attitude of sticking to agreements and fulfilling the goals that have been set is enormously important for the confidence of the market," said the Deutsche Bank boss of the dpa in his function as President of the Association of German Banks (BdB).

“In the long term, we will all benefit from the debt brake.

But you also have to keep an eye on the respective situation, and then it can make sense to act a little more flexibly temporarily.” Sewing cited the special fund for defense as an example.

dpa