May 7, 2015 10:44 AM

Germany ups tax income forecast amid robust economy

The Associated Press

BERLIN (AP) Germany's government said Thursday it is expecting to reap more from taxes over the coming years as Europe's economy grows at a solid tick, and is proposing to hand some of that windfall back to individuals by increasing the levels at which higher rates of tax are paid.

It is now predicting a tax take of 666.5 billion euros ($750 billion) this year up from the 660.2 billion euros it forecast in November and an improvement on last year's 643.6 billion euros. Through 2019, it is predicting a total gain of 38.3 billion euros compared with the previous forecast.

In light of the forecasts, Finance Minister Wolfgang Schaeuble proposed shunting tax brackets upward in 2016 to take account of the past two years' inflation.

Politicians have long pledged, but so far failed, to tackle the fact that Germans often see wage increases eaten up by the fact they move into a higher tax bracket.

Also Thursday, the Economy Ministry said factory orders picked up in March after two consecutive declines thanks to higher domestic demand, though the improvement was smaller than economists expected.

Orders rose 0.9 percent over the previous month after declining by the same amount in February. Economists had predicted a 1.5 percent rise.

Orders from inside Germany were up 4.3 percent and those from other countries in the 19-nation eurozone rose 2.5 percent. However, demand from countries outside the eurozone sagged by 4 percent. The ministry also said there was above-average number of orders for big-ticket items.

UniCredit economist Andreas Rees pointed to the U.S. economy's near-stagnation in the first quarter and a slowdown in emerging markets as reasons for lower recent foreign demand. However, he said, the latest data "bode well for economic activity going forward."

The German government recently said it expects the economy to grow by a solid 1.8 percent this year and next.


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