BERLIN (Reuters) - Germany will likely need to make changes to its corporation tax system in coming years in response to growing tax competition from other countries, Finance Minister Wolfgang Schaeuble said on Wednesday, adding that Germany had wiggle-room for cuts.
In a manifesto document ahead of Britain’s June 8 election, Britain’s ruling Conservatives - who emerged as the largest party but lost their parliamentary majority - said corporation tax would be cut to 17 percent by 2020.
“I expect there will be a need to take action on corporation tax in coming years because in some countries, from the U.S. to Britain, but also on other continents, there are many considerations where we can’t simply say we’ll ignore them,” Schaeuble told a real estate conference.
He said that if Germany continued to pursue a modest fiscal policy in the coming years and remained competitive, the government would probably have wiggle room of around 15 billion euros (13.22 billion pounds) per year.
Schaeuble also promised that his and Chancellor Angela Merkel’s conservatives would also act to boost home ownership levels in Germany if re-elected in September.
While more than 70 percent of European households own a flat or house on average, only around 45 percent of Germans do, he said, and added while this was related to Germany’s history of war and division, Germans should gradually catch up.
Turning to the European Central Bank), Schaeuble said that while the ECB’s ultra-loose monetary policy had helped to tackle the financial crisis in recent years, the longer that policy was applied, the greater the risk of “unwanted side effects”.
He also warned that investors’ risk appetite could “grow excessively” given low capital market yields, while there could be negative effects for the stability of financial markets or delays in carrying out urgently-needed structural reforms due to a lack of disciplinary pressure from the markets.
“I’m one of those who would welcome it if we could lay the groundwork for exiting ultraloose monetary policy,” Schaeuble said, adding that the recovery in the euro zone made this more feasible while the danger of deflation has been “indisputably banished”.
Despite rising housing prices, Schaeuble said he did not think the German real estate market was overheating, saying there was no credit-financed real estate market bubble.
He said not all inflated prices on the housing market endangered overall financial market stability and added that would only happen if rising real estate prices, excessive lending and loosening lending standards all came together.
But he warned that a slight loosening in bank lending standards for the first time since 2010 could be “an initial warning sign”.
Schaeuble said the rescue of Spain’s Banco Popular, which was wound down by European authorities, showed that the EU’s resolution fund, restructuring fund and restructuring authority were working as it happened “without any contagion risks for Spanish and other EU bank and financial institutions”.
Reporting By Thomas Escritt; Writing by Michelle Martin; editing by Mark Heinrich