BERLIN Annual German tax breaks of 6.3 billion euros (5.5 billion pounds) could take effect as early as January 2017 after the conservative Christian Democrats reached agreement with the centre-left Social Democrats, junior partners in the ruling coalition, government sources said on Wednesday.
The agreement paves the way for the German cabinet to approve the tax reform plans proposed by Finance Minister Wolfgang Schaeuble next week, the sources said.
The Handelsblatt newspaper, which first reported the agreement, said Schaeuble would present his tax plans at the annual meeting of the International Monetary Fund in Washington this week.
The tax breaks are intended to "support domestic demand" and counter global criticism that Germany’s export-oriented economy has contributed to a global trade imbalance, the newspaper said, citing a ministry official.
The tax relief includes 2.3 billion euros in measures aimed at correcting so-called "creeping tax increases," such as when workers slip into higher tax brackets solely they receive more money to compensate for inflation, according to the government sources.
The measures also call for an increase in tax exemptions for adults and children, and a modest increase in child benefits, they said.
No comment was immediately available from the ministry.
(Reporting by Andrea Shalal and Matthias Sobolewski; Editing by Alison Williams)