Taxation Chatter

I sat and watched a short finance news piece this morning on the German government taxation.

For those who don't know....there's an anticipated recession projected to start in 2019 in Germany, and a fair-sized hole with taxation money.

The key people running the finance 'bucket' for Germany (because of the coalition) is the SPD Party, with Finance Minister Olaf Scholz running the show. He's the former mayor of Hamburg, and considered the likely candidate for the SPD Party in 2021 for Chancellor.

So the discussion going on behind closed doors is that new taxation will have to be created.  One of the items discussed.....more taxation on tobacco products.

The gimmick?  This gets to an interesting scenario.  Presently, cheap cigarettes run around 5.5 Euro (for 20 in a pack), and the more expensive going to 6.0 to 6.5 Euro (figure $6.60 to $7.25).  It's not cheap.  If you buy loose tobacco and make/roll your own smokes?  They discount the case, and it's about 25-percent less for the same pack of smokes.

Scholz wants a five-phase rise in taxation on smokes.  Each single step up, would bring in 200 to 300 million Euro extra.  At the end of this phased approach, there would be a billion-plus Euro coming in each year, on top of the normal and present tax (14.3 billion Euro a year). 

Taxation same for E-cigarettes?  No.  He didn't touch them.

What'll happen (if the CDU agrees with this idea)?  Germans will shake their heads, with one of two scenarios likely to play out. 

1.  More black-market cigarettes will arrive in Germany, and miss taxation entirely. 

2.  Most everyone will shift over to E-cigarettes, and the 14.3 billion Euro a year via regular tobacco will disappear entirely.  You can figure three years into the future, there's some massive taxation rise that will occur with E-cigarettes. 

In either scenario, the government loses income and is put into a worse situation. 

Taxation troubles likely to be a monthly political discussion and long-term issue?  Unfortunately, yes.  After you get past asylum/immigration, climate change, grumbling over the train system, the high cost of heating....taxation starts to come up and public frustration is apparent.