The German government wants to raise its annual spending by some €40 billion ($44.7 billion) by 2021 compared with 2016 while keeping a balanced budget, a Finance Ministry document seen by Reuters showed on Friday.
Europe’s largest economy has been growing for six years in a row. Record tax revenues have allowed Finance Minister Wolfgang Schaeuble to raise spending on infrastructure and on accommodating the more than 1 million asylum seekers who arrived over the last two years without having to issue net new debt.
Under the plan, which must be approved by the Cabinet next week and passed by the Bundestag lower house after the general election on Sept. 24, spending will rise by €39.7 billion from last year to €356.8 billion in 2021.
Schaeuble last month announced higher tax revenue estimates for this year and rejected criticism that Germany was not investing enough.
The government said in the draft budget document it wants to raise spending on transport infrastructure by €1.4 billion next year to €14.2 billion. Education and research will get an injection of €341 million for a total budget of €17.6 billion, the document showed.
Three months before German voters go to the polls, political opponents have been demanding greater investment in education and more funds for households who do not earn enough to pay income tax.
Economists and business lobby groups have demanded an overhaul of Germany’s tax system, namely steeper tax relief that would boost consumption and growth and a lower corporate tax rate to encourage private investment.
The government also wants to increase defense spending by €1.5 billion next year, an increase of 4 percent from this year’s budget of €37 billion.
US President Donald Trump accused allies at a NATO summit last month of not spending enough on defense.
The draft document on Friday showed that Germany intends to increase defense spending by a total of €9 billion by 2021, an increase of 9 percent.
Convergence on corporate tax
New French Economy Minister Bruno Le Maire has called for swift convergence with Germany on corporate tax and said his government will implement “difficult” measures this summer to ensure France honors its European pledge on public spending.
In an interview with the French daily Le Figaro made available on Friday, Le Maire said his teams would draft proposals on taxes ahead of a Franco-German meeting scheduled for July 13.
“Our ambition is to achieve quick convergence of corporate tax. We want to move very fast,” he said, adding that a reinforcement of the euro zone would also help make the bloc more competitive with China and the US.
Le Maire also said the French government would take “difficult” domestic measures in the coming weeks to help France keep its word on public deficits but did not elaborate.
He added that an existing tax break could be converted to a cut in employer contributions.
France, the euro zone’s second-largest economy, foresees a reduction in its deficit to 2.8 percent of gross domestic product (GDP) this year, which would be the first time since 2007 that it has met an EU-imposed limit of 3 percent.

Source: Arab News