Germany plans tax changes to help households cope with inflation

Germany’s finance ministry plans to raise income tax thresholds and slightly increase child benefits in response to the highest inflation in the country in decades, officials said on Tuesday, but critics said the move benefited top earners most.

The tax-free allowance will rise to 10,632 euros next year and 10,932 in 2024 from 10,347 euros currently, the officials said. Meanwhile, the top tax rate will kick in from an income of 61,972 euros next year and 63,515 euros in 2023, compared with 58,597 euros currently.

Child benefits for the first two children will rise by 8 euros to 227 euros per month in 2023, the officials said.

Tax revenue is set to decline by 10.12 billion euros next year as a result, and 17.5 billion in 2024, the officials said.

The plans of Finance Minister Christian Lindner of the pro-business Free Democrats (FDP) aim to provide some relief to households after German inflation hit 8.5% in July, driven by soaring food and energy prices, the officials said.

Yet politicians from fellow junior coalition partner the Greens as well as the far-left Linke party were quick to attack them as being most advantageous to the wealthy.

“Billion-euro tax relief measures that top earners benefit from three times as much as those on low incomes – that is not in keeping with the times,” Katharina Beck, spokeswoman on financial matters for the Greens, told the RND newspaper group.

The German umbrella welfare association said child benefits should increase by at least 10 percent, or 22 euros.

“Those who really want to provide families relief can’t be messing around with peanuts,” it said.