German Finance Minister Wolfgang Schaeuble has dampened hopes of a reform of Germany's "cold progression" or bracket creep during the present legislature, saying in a newspaper interview there were no plans to tackle it in 2016. A German government spokesman said last month that there was no room in the 2014 or 2015 budget to tackle cold progression as the priority was budget consolidation, but that comment raised expectations such a move could come in 2016.
"I know of no such plan, and I haven't discussed such a matter with anyone," Schaeuble, a Christian Democrat (CDU), told the Neue Osnabruecker Zeitung in an interview published on Saturday. The Social Democrats (SPD), coalition partners to Chancellor Angela Merkel's conservatives, have pushed for the abolishment of a tax code rule that income tax brackets are not adjusted for inflation.
Unlike major economies such as the United States, Britain and France, thresholds in Germany's progressive tax system are not automatically adjusted - something the Organisation for Economic Co-operation and Development (OECD) has urged it to address via the introduction of index-linked tax brackets. The German government surprised with a slightly lower tax revenue estimate for 2014 earlier this month, which Schaeuble said left Germany no financial leeway to cut taxes.
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