Germany's Guttenberg calls for major tax reform

Germany's Economy minister Karl-Theodor zu Guttenberg called for a dramatic revision of German tax laws in an interview published Sunday by Welt am Sonntag, German The Local says.

Saying that top tax rates are too high, Guttenberg called the current system, «unjust» and «demotivating.»

«It’s completely the wrong recipe during the crisis,» Guttenberg told Welt am Sonntag.

Guttenberg’s Christian Social Union, the Bavarian sister party of the conservative Christian Democrats (CDU), has adopted tax cuts as one of its main party platforms ahead of national elections on September 27.

Guttenberg singled out «cold progression» whereby taxes increase faster than incomes rise, as a particular problem in the German tax system. Chancellor Angela Merkel has said in the past that cold progression is a problem that her CDU wants to address.

Falling government tax revenues due to the recession may put a crimp on plans to cut taxes though. The government announced Thursday that new projections showed a €316 billion hole in the budget over the next four years thanks to a series of bank rescues, stimulus packages, greater social outlays and falling government revenue.

The result is a budget deficit, for the federal government alone, of around €80 billion this year, more than double the previous biggest overspend of €40 billion in 1996, according to government sources.