Germany Raises Income Tax Threshold to Combat Inflation... 13 Trillion Won Reduction Effect

[Image source=Yonhap News]

[Asia Economy Reporter Buaeri] The German government is lowering income tax and increasing child benefits to counter inflation.

The German Ministry of Finance plans to enact an inflation adjustment law to raise the annual income threshold for the non-taxable income bracket from 10,347 euros (approximately 13.84 million KRW) to 10,632 euros (approximately 14.22 million KRW) next year, and to 10,932 euros (approximately 14.62 million KRW) in 2024.

The annual income threshold for the highest tax rate bracket will also increase from 58,597 euros (approximately 78.39 million KRW) to 61,972 euros (approximately 82.90 million KRW) next year, and to 63,515 euros (approximately 84.96 million KRW) in 2024.

Christian Lindner, German Minister of Finance, said at a press conference on the 10th (local time), "48 million people will benefit," adding, "The broad middle class will see a reduction in the burden caused by inflation."

The reduced income tax amounts to 10 billion euros (13.4 trillion KRW), with an average income tax burden reduction of 192 euros (approximately 260,000 KRW) per person.

Minister Lindner emphasized, "This is to support people's daily living expenses amid soaring prices caused by Russia's invasion of Ukraine following COVID-19."

The Ministry of Finance will also increase the monthly child benefit for the first and second child in a household by 8 euros (approximately 10,000 KRW). Next year, 227 euros (approximately 300,000 KRW) will be paid per child.

Last month, consumer prices in Germany rose by 7.5%. In particular, energy prices surged by 35.7% compared to a year ago, and food prices increased by 14.8%.