Germany will offer tax breaks worth 10 billion euros ($10.2 billion) to help workers cope with rising inflation, according to the country’s finance minister, Christian Lindner.
The package will raise the tax-free base allowance so workers can get some tax relief. Approximately 48 million Germans stand to benefit from the move. Increased child benefits also seem to be in the cards, reported AP News.
Lindner stated that his plan focuses on employees facing a higher tax burden because of cost-of-living raises intended to offset inflation.
In Germany, inflation dipped to 7.5% in July, a tenth of a percentage point lower than the 7.6% recorded in June and four-tenths lower than the high in May.
According to the country’s statistical agency, food prices in Germany reached their highest level in July, despite the overall slowing down of inflation, reported The Epoch Times.
German food prices clocked a 14.8% inflation rate in July, the fastest inflation rate since the country’s statistical agency started tracking the metric in 1970. Double-digit price jumps were recorded in several categories, including meat (18.3%) and dairy (24.2%).
According to Lindner, if no relief is provided, 48 million Germans would face higher taxes beginning in January 2023.
The tax cuts come after Chancellor Olaf Scholz announced a 30-billion-euro package earlier this year to help consumers beat inflation.
The previous package included lower fuel taxes and a monthly public transportation ticket valid throughout Germany for only nine euros in June, July, and August.
Still, as winter nears, it is clear that the clouds over Europe’s largest economy are only getting darker.
Russia’s war in Ukraine has dashed Germany’s hopes of finally shaking off the economic fallout from the COVID-19 pandemic.
Western sanctions on Russia prompted the country to retaliate by weaponizing its energy exports to Europe.
Hikes in energy costs have further eroded German consumers’ purchasing power and harmed German industry, which relies heavily on low-cost energy supplies to manufacture exports.
Employees face a double whammy of rising costs and a growing threat of layoffs as major corporations consider idling some factories because keeping production lines running may no longer be cost-effective.
Germany’s growth slowed in the second quarter, and analysts predict a recession in the second half.
In their most recent forecast in March, the German government’s economic advisers predicted 1.8% GDP growth in 2022, Yahoo News reported.