Financial and Taxation Policy
75. The need for reconstruction in Eastern Germany has had a lasting impact on the parameters of taxation policy. In order to accelerate the process of bringing together the two parts of Germany, we presently have a higher level of public borrowing, an increased public sector share of the GNP, a heavier burden of taxation, and higher public spending. When this transitional period is over, it will be important to reduce state borrowing drastically, consolidate all public budgets, reduce the public sector share of the GNP, and, in the medium term, lower the tax burden. Reducing the public sector share and consolidating public-spending budgets must be the criteria for all decisions made by financial policymakers. We can pave the way for reduced public borrowing by redefining the role of the state. We must decide anew what our public-spending priorities are, what the state and the social insurance system can do, what public services can be offered via the market, and what we will have to do without.
There is a need to alter structures, reduce expenditures, and increase efficiency. By deregulating, privatizing, and reducing bureaucracy we wish to achieve a situation whereby public resources are spent more effectively and achieve better value for the money. More so than in the past, we want to finance certain public functions through specific charges in the form of fees or prices and by requiring individuals to pay a share of the costs involved. This will create greater transparency as regards the cost of public services, encourage competition, and lead to better value for the money and the more economical provision of such services.
In order to consolidate public spending it is necessary to reduce subsidies significantly. In the long term, subsidies undermine market forces, distort competition, hinder structural change, and interfere with the smooth operation of the economy. We wish to further reduce financial aid, tax concessions, and other subsidy-type expenditures. All subsidies should, on principle, be of limited duration and designed to be digressive. Subsidy fraud and tax evasion must be combated with the full force of the law.
76. The basic principle of social justice must be adhered to not just for those receiving state provisions—in particular social security—but also where taxation and other levies are concerned. Justice must apply not just to distribution but also to the necessary contributions. Taxes and other levies must not cripple private initiative and the performance of workers and industry alike.
In order to achieve more transparency and greater justice and at the same time reduce the administrative burden, we support the greatest possible integration of the tax system and those social security benefits not directly related to contributions.
In the medium term, we want both to reduce the overall burden of taxation and also to restructure the taxation system. The levels of taxation imposed on the production factors of capital and work are too high. We want low rates of direct taxation but also a broader basis of assessment with fewer tax concessions and exceptions. This will both simplify the system and also make it more equitable. At the same time, we will have to impose higher levels of taxation on consumption, particularly in the case of energy consumption and activities that have an impact on the environment. By reorienting the taxation system both economically and ecologically we will be making a crucial contribution to the further development of the ecological and social market economy. This is also in line with the requirements imposed by international competition regarding corporate taxation, as direct taxation in many countries is lower than it is in Germany. In the future, non-monetary capital must not be fiscally disadvantaged vis-à-vis financial capital. We want to reduce taxes independent of income and push ahead with the harmonization of taxes within the EU.
Monetary Policy
77. Monetary stability is of crucial importance for maintaining consistent economic growth and as a basis for social justice. Stability serves the interests of both consumers and savers. For a monetary policy to succeed all those involved in economic activity, including both trade unions and management, and central, regional, and local authorities must contribute to maintaining stability.
In Europe, ensuring monetary stability is our common concern. As markets become intertwined, individual currencies and national central banks can no longer ensure stability on their own. A heavily export-dependent country such as Germany needs the stable purchasing power of the European market. We are striving to achieve an economic and monetary union, and the prerequisite for this is adherence to the convergence criteria laid down in the Maastricht Treaty. The criteria for admission to the monetary union make very high demands on the economies of the countries concerned, especially with regard to low inflation rates and budgetary discipline. These criteria must not be altered.
Within the economic and monetary union, the responsibility for monetary matters is transferred to the European Central Bank, which, like the German Bundesbank, is independent and has price stability as its main priority. With the European monetary union we want to create the basis for maintaining monetary stability with a common currency that should have the same degree of stability as the Deutschmark.
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