Scholz rules out tax increases to relieve inflation

Fri 8th Jul, 2022

Chancellor Olaf Scholz currently sees no possibility for tax increases to distribute the burden of inflation more fairly. "We do not have a legislative majority for tax increases," the SPD politician told ZDF's "Maybrit Illner" program on Thursday.

"This is something where different convictions exist," he added, referring to coalition partner FDP. He said he himself was in favor of a fairer tax system, as was also enshrined in the SPD's program for last year's federal election.

Politicians from the SPD and the Greens are calling for companies and the rich to bear a greater share of the burden of the current crisis. In particular, there is talk of an excess profits tax for oil companies, which are profiting greatly from high energy prices.

Most recently, SPD Secretary General Kevin Kühnert and Bundestag Vice President Katrin Göring-Eckardt spoke out in favor of this in "Der Spiegel" on the weekend. However, there are also calls for a wealth tax or an increase in inheritance tax.

The FDP, however, categorically rejects tax increases. "In view of the fragile economic development, such debates are completely counterproductive. There is a threat of a downward spiral of recession and rising burdens," Secretary General Bijan Djir-Sarai told dpa only at the beginning of the week.

Despite the growing economic problems at home, Scholz appealed to maintain solidarity with Ukraine for as long as necessary. "I believe that you can always act only with the support of citizens," he said. "But I believe that this will be possible for a very long time, and that we can maintain solidarity with Ukraine from Germany for as long as it is necessary."

Germany, he said, is also committed to this solidarity for its own sake, because democracy and the rule of law are being defended in Ukraine against the Russian aggressors. "We cannot accept a country invading its neighbor and saying, I'm stealing a piece of that territory, it's mine now."

Scholz defended the sanctions imposed on Russia. Politicians from the left and AfD parties had recently called for punitive measures against Russia to be lifted or for the Nord Stream 2 gas pipeline to be put into operation in order to avert an energy emergency.

There are fears that Russia could cut off gas supplies to Germany altogether as early as July. In the wake of the Ukraine war, prices for energy, but also for food, for example, have risen significantly.

Scholz also criticized the EU's green label for investments in certain gas and nuclear power plants. "I always thought that was wrong," he said. He said the federal government of the SPD, Greens and FDP had voted against it, but had been unable to prevent the regulation.

They then made sure, he said, "that it still fits us halfway." Scholz emphasized, "In Germany, we are in complete agreement that nuclear energy is not green."

In the EU Parliament, a majority had backed the eco-label project on Wednesday. Specifically, it involves a supplementary legal act to the EU's so-called taxonomy. It is a classification system designed to steer private investment into sustainable economic activities to help fight climate change.

It is relevant for companies because it could influence the investment decisions of investors and thus have an impact on project financing costs, for example. Investors are also to be enabled to avoid investing in sectors of the economy that are harmful to the climate.

Environmentalists had urged MEPs to vote against the new legislation before the vote. Among other things, they criticize the fact that greenhouse gases are emitted when energy is generated with natural gas. In the case of nuclear power, it is mainly the waste, but also possible accidents, that are considered problematic.

Proponents, on the other hand, point to the need for transitional technologies and to the fact that liquefied gas, for example from the USA, or hydrogen can also be used to operate gas-fired power plants.

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