Monday, September 21, 2009

Obama, America are you listening?

German business buoyed by tax cut prospect
FT.com

Angela Merkel’s move to put tax at the top of the political agenda as she enters the final week of the campaign will cheer business leaders, who have so far ducked the issue of endorsing a particular party.

German business leaders have told the Financial Times they want their next government to cut taxes, a sign that the corporate sector would favour a mandate for Ms Merkel to form a clear centre-right government in Sunday’s election and end the uncomfortable “grand coalition” with the centre-left social democrats. Jürgen Hambrecht, chief executive of BASF, the chemicals group, told the FT he would like to see an “initiative to spur economic growth” that would clearly back high-tech sectors such as biotechnology, as well as “an attractive tax system”.

Werner Schnappauf, director-general of the BDI, the industry association, said last week: “Every reduction in taxation raises economic activity. This will create growth and employment, helping to ease the way out of the crisis.”

Business leaders have given the coalition good marks for crisis management over the past 12 months of financial meltdown and severe recession, but it scores poorly on longer-term projects, such as tax reform, where its scope for ambitious reforms has been limited by the lack of common ground between the conservative and leftist agendas. According to the head of one of the largest industrial groups, Ms Merkel has “done nothing for the country” thanks to a government that had “really been a red one with a light grey tone”.

But the tightness of the election race means another grand coalition is one of the likelier outcomes. As a result, many business leaders have been unwilling to publicly criticise the grand coalition or openly endorse a CDU-Free Democratic party coalition.

Ms Merkel’s pledge on Friday to cut income tax “for every taxpayer” came as doubts grow that her Christian Democratic party will win enough votes to head her preferred coalition with the liberal, pro-business FDP – seen as most likely to pursue a tax-cutting agenda.

She is battling a surge in support for Frank-Walter Steinmeier, the SPD leader, whose party has called for a higher top rate of personal income tax and a possible rise in value added tax.

Business leaders have been willing to work with the SPD’s moderate and pragmatic leadership.

Eckhard Cordes, chief executive of Metro, a large retail group, and a member of the CDU’s business ­council, has praised both Ms Merkel and key SPD ministers for their handling of the global crisis.

By Gerrit Wiesmann, Chris Bryant, Daniel Schaefer and Bertrand Benoit

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