The German government has agreed to limit the scope of plans it announced last week to offer tax breaks on new cars, a spokesman said on Wednesday. The government plans are designed to help the auto industry, which accounts for roughly 20 percent of German jobs, and is part of a package to give Europe's biggest economy a 50 billion euro ($63 billion) boost in investment and contracts.
But under pressure from the Social Democrats (SPD), who share power with Chancellor Angela Merkel's conservatives, the government agreed to limit the tax breaks to cars registered by the end of June next year. Originally, the breaks had been envisaged to cover cars registered by 2010. All cars registered by June next year will now be exempt for tax for one year and those with low emissions for two years. The length of the exemption is unchanged.
The newly imposed limits are an interim measure as the government will draw up new rules to help boost sales of environmentally-friendly vehicles by next June. Government spokesman Thomas Steg said the government made the quick change to the car tax plans to give carmakers and consumers clarity as soon as possible.
He said a draft of the new rules to boost environmentally friendly vehicles would go to parliament in this legislative period. But the government does not expect the law to be passed before next September's parliamentary elections, he said. The SPD had argued the original plans had offered too much financial support to expensive, fuel-guzzling cars and wanted to increase the incentives for consumers to buy environmentally friendly cars.
Handelsblatt daily also reported that the VDA automotive association was in talks with the government about possible aid for the supplier industry, citing sources from the sector. However, there were no concrete ideas yet, said the paper.
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