Tax cuts debate complicates German coalition talks

Germany’s chances of securing a new “grand coalition” government face fresh uncertainty after the sister party to Chancellor Angela Merkel’s Christian Democrats called for cuts to corporate tax rates.

Bavaria’s CSU party outlined its hopes for slashing corporate taxes in a three-page position paper, German magazine Focus reported Monday.

The CSU’s proposal to cut taxes in Germany is at odds with the position of the Social Democrats (SPD), who are set to meet with Merkel on January 7 for exploratory discussions about potentially forming a coalition with the chancellor’s CDU and the CSU.

The SPD has already said that it wants to increase taxes for the wealthy while calling for more public spending in areas like education, healthcare and infrastructure.

“If Germany does not act, it will in the near future have one of the highest corporate tax rates when compared internationally,” the CSU paper stated.

The Bavarian party’s proposal also comes after U.S. Republican lawmakers passed a bill that will slash the country’s corporate tax rate from 35 percent to 21 percent. The U.K. and France also intend to cut their corporate taxes.

“Our response to the U.S. tax reform must be a triad of planning certainty, tax cuts and an improvement of depreciation conditions,” the CSU paper said.

Merkel is under pressure to build a new government after coalition talks with Germany’s liberal Free Democrats and the Green party fell apart in late November.

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