The Federal Ministry of Finance has submitted a ministerial draft intended to provide financial relief for taxpayers.
Problem and objectives of the Tax Relief Act
In the current political and economic situation, the cost of living is rising. Reasons for this include increasing inflation, supply shortages as a result of the coronavirus pandemic, and the conflict between Ukraine and Russia. In recent weeks, price increases have been particularly noticeable in the energy sector, but significant price rises are also evident in other areas of daily life. This affects low-income groups in particular, which is why the draft bill is now intended to provide relief for these groups. The basis for the tax relief is an increase in the employee lump-sum allowance, an increase in the basic personal allowance, and an accelerated increase in the commuter allowance. The aim is not only to relieve taxpayers financially, but also to reduce the administrative burden on the tax authorities.
One issue that arises from the tax relief is, logically, the reduced tax revenue for the federal government, the federal states, and the municipalities. According to preliminary calculations by the Federal Ministry of Finance, annual tax revenues will be approximately EUR 4.5 billion lower overall than before the relief measures.
Tax relief measures
The specific tax relief measures are outlined below:
- Employee lump-sum allowance
To reduce the income tax burden, the employee lump-sum allowance will be increased from EUR 1,000 to EUR 1,200 per calendar year. This increase is to apply retroactively from 1 January 2022.
- Increase in the basic personal allowance
Tax relief is to be achieved particularly for low-income groups. For this reason, the basic personal allowance will be increased a second time. Originally, it was to be raised from EUR 9,744 in 2021 to EUR 9,984 in 2022. The ministerial draft proposes a further adjustment to EUR 10,347 in order to relieve the groups mentioned.
- Early increase in the commuter allowance
An increased burden is also apparent for commuters as a result of price rises in the energy sector. This burden is to be mitigated by raising the commuter allowance to EUR 0.38 already in 2022 rather than in 2024. However, the increased commuter allowance only applies from the 21st kilometre of distance onwards.
Frequently asked questions
Frequently asked questions
To what amount is the employee lump-sum allowance (Arbeitnehmer-Pauschbetrag) raised by the 2022 Tax Relief Act (Steuerentlastungsgesetz 2022)?
The employee lump-sum allowance is raised from €1,000 to €1,200 per calendar year. The increase is to apply retroactively as of 01/01/2022 and results in a reduction of the income tax burden for employees.
What is the basic tax-free allowance for 2022 under the Tax Relief Act?
For 2022, the basic tax-free allowance (Grundfreibetrag) is being increased a second time, from the originally planned €9,984 to €10,347. By comparison, it stood at €9,744 in 2021. The measure is intended in particular to relieve lower-income groups.
From when and at what rate does the increased commuter allowance apply?
The commuter allowance will rise to €0.38 per kilometer as early as 2022 (instead of 2024). However, the increase only applies from the 21st kilometer onward and is intended to relieve commuters in light of rising energy prices.
What are the financial implications of the 2022 Tax Relief Act (Steuerentlastungsgesetz 2022) for public budgets?
According to preliminary calculations by the Federal Ministry of Finance, the combined annual tax revenues of the federal government, the federal states and the municipalities will be approximately EUR 4.5 billion lower than they would have been without the relief measures.
What reasons led to the draft of the 2022 Tax Relief Act (Steuerentlastungsgesetz 2022)?
The background is the sharply rising cost of living, particularly in the energy sector, as a result of inflation, supply bottlenecks caused by the Corona pandemic, and the Ukraine-Russia conflict. The aim is to provide relief especially for low-income groups while simultaneously reducing the administrative burden on the tax authorities.