Germany's Tax Audit

Saying that it was far from certain that Germany's budding economic growth would continue, BRH president Dieter Engels warned the government against using extra tax revenue for purposes other than debt reduction.

"According to BRH estimates, it's not clear that tax revenues will develop favorably when compared to expectations," Engels said in Berlin, adding that the government had also failed to consider potentially higher subsidies for pension funds and health insurances as well as a rise in interest rates in its tax calculations.

"Take financial planning more serious than you do right now," Engels told those in power, adding that the government also had to continue cutting expenditures to keep new debt at a bearable level.

Room for improvement

Like every year, Engels also presented a list of potential measures to save taxes and increase revenues as his agency uncovered wasteful tax spending. While Germany's Association of Tax Payers claims that the government wastes 30 billion euros annually ($38.5 billion), Engels said about 2.2 billion could be saved by adopting some changes. They include:

* Using private driving schools in the military rather than keeping the Bundeswehr's own program (Savings of about 17 million euros.)

* Introducing a flat sales tax in fast food restaurants. Currently, food consumed on the premises carries a 16 percent tax while take-away orders are taxed 7 percent. According to BRH officials, this has led some restaurants to register sit-down orders as take-away to increase their profit. (Estimated additional revenue of about 400 million euros.)

* Auditing those with an annual income of 500,000 euros or more on a regular basis, as required by law. Currently, only 15 percent are audited regularly despite the fact that each audit brings additional tax revenues of 135,000 euros on average, according to Engels.

Economy keeps growing

Germany's statisticians on Tuesday meanwhile had some good news for Germany's leaders: The country is on track to deliver its best economic performance since the 2000 boom, when the German economy expanded by 3.1 percent.

Germany's economy grew by 0.6 percent in the third quarter of 2006 from the previous three months, according to preliminary, seasonally corrected figures.

Overall annual growth seems set to meet forecasts of more than 2 percent for the year owing to an upward revision of figures for the first two quarters.

"The recovery of the German economy continues," federal statistics officials said in a statement.

Exports continued to increase from the second quarter to the third to underpin growth, as did greater domestic demand, the office added. Industrial investment was also stronger, providing additional support for the traditionally export-led economy.

Low domestic consumption has been a chronic weak point in Germany, and analysts said they expected consumption to peak between now and the end of the year as shoppers make major purchases before a 3 percent increase in value-added tax (VAT) takes effect at the start of

2007.

Investor confidence drops slightly

Analysts also said that the economy was not only expanding but showing healthy progress that was investment-driven. But German investor confidence fell for the 10th month in a row in November. The drop, however, was not as steep as in previous months.

The ZEW index, compiled by the Mannheim-based Center for European Economic Research and released Tuesday, dipped 1.1 points to minus 28.5 after a 5.2 percent drop in October and a 22.2 percent decline in September.

It was the lowest level since 1993 and the 10th consecutive fall in the index, which measures sentiment among investors and analysts six months down the track.