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Germany looks at tax

The German government’s pensions commission has proposed to end the tax-deductible status of life insurance premiums and alter the tax rules for pensions.
Among the proposals in the commission’s report on tax-treatment of the pensions presented to the government this week, recommendations were made to eliminate the tax deductibility of contributions to life insurance policies, and the tax exemption of payouts of new policies. The commission is headed by academic Bert Ruerup.
Finance minister Hans Eichel has said the recommendations were interesting and that the government would look into the implications of the proposals, and propose legislation in time for 2005.
Also proposed by the commission is the progressive move to a tax-free contribution, taxed-benefit pension system.
l Meanwhile Germany’s social security minister Ulla Schmidt is examining how to simplify and boost the take-up of Riester personal pensions, in a U-turn from Chancellor Schröder’s insistence last year that no changes would be made.
Talks are underway about how to encourage more citizens – including the self-employed - to take up private pensions. One issue being discussed is how to simplify the ways by which the Riester-Rente are taken up. The ministry is said to be “open to relevant proposals”.
Changes to the Riester-Rente process have become necessary. The take-up of private Riester pensions – named after former labour minister Walter Riester – one year after their introduction has been below expectations. At the end of last year around 3m Germans had signed up for one – significantly lower than Schmidt’s target of 4m.
The slow take-up has been blamed on complex rules, and uncertainties over last year’s election results.
It had been hoped that a new government would simplify the procedures, but Chancellor Gerhard Schröder insisted that no changes would be made.
The U-turn will no doubt provide some relief, although Schmidt has given no clue about how any revision would occur.

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