Mubasher: German government agreed on Wednesday to exempt most of the taxpayers from the solidarity tax, which was levied after the country’s reunification.
A draft law by Finance Minister Olaf Scholz will scrap the 5.5% tax, which is added to income levy, for around 90% of taxpayers as from 2021.
The due amount will be reduced for further 6.5% of taxpayers, while only high earning citizens will have still to pay the full tax.
The tax has been introduced mainly to support economic development in the poorer eastern states which formed the Communist German Democratic Republic, until the collapse f the Berlin Wall in 1989.
“Today is a significant day on the road to the completion of German unity. The costs of reunification have in large part come to an end,” Scholz said.
The changes will result in nearly EUR 10 billion ($11.1 billion) in tax relief from 2021, and will rise to EUR 12 billion by 2024, according to the Finance Ministry.
Last year, the tax contributed EUR 18.9 billion to the federal budget.
It is worth noting that Chancellor Angela Merkel’s government saw no new debt since 2014, owing to a protracted growth cycle, record-high employment, strong tax revenues, and ultra-low interest rates.