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Germany

Smokers to cough up more for cigarettes as industry gets tax break

The German government says it wants to cancel plans to make heavy industry pay more for polluting. Instead it will hike the price of cigarettes through a new tobacco tax.

A cigarette hangs from a smokers mouth

Smokers would be made to fork out more for cigarettes

The German government says it favors raising the price of cigarettes through a new tobacco tax rather than taxing heavy industry as originally envisaged in the government's economic austerity program.

Following a meeting at the Chancellery on Sunday, Finance Minister Wolfgang Schaeuble and Economics Minister Rainer Bruederle said the move would see the financial burden on energy-intensive industries eased by nullifying previous plans to slash a rebate such companies were entitled to on a so-called "eco-tax."

The measure is expected to spare heavy industry from having to fork out around 600 million euros ($841 million) each year for the eco-tax.

The ministers stressed, however, that the replacement tobacco tax was not yet set in stone and was still only a proposal. They said it would be put to parliamentary groups for discussion on Monday.

News agency Reuters reported that any such tax would seek to bring in around 200 million euros in additional revenue for 2011, with this figure rising to 800 million euros by 2014.

Industry lobby victory?

A smoke stack at a factory

Heavy industry will view the tax reversal as a success

Birgit Homburger, leader of the parliamentary group of junior coalition partners the Free Democrats, said easing the eco-tax burden would help secure jobs and aid Germany in maintaining its reputation as an attractive location for energy-intensive industries.

However, the move is likely to anger green and leftist groups. The Left Party has already voiced opposition to easing the tax burden on industry.

The decision by the German government serves the "lobbying interests of the corporations" and places the costs of the financial crisis on those who are not responsible for it, said Left Party taxation spokeswoman Barbara Hoell on Monday.

Industry groups had heaped pressure on the government over the eco-tax, arguing that slashing eco-tax rebates could endanger up to 870,000 jobs and complicate operations for medium-size businesses.

Hans-Peter Keitel, president of the Federation of German Industries, said that reducing the rebate would threaten stability in the country's entire industrial sector.

Also to come from the meeting at the Chancellery was confirmation of a plan to simplify German taxes from 2012. The scheme would save German taxpayers around 500 million euros, ministers said, and could be partially retroactive for 2011. It would also mean tax returns would only have to be filed every two years.

Author: Darren Mara (dpa, Reuters)
Editor: Nancy Isenson

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