Exploiting efficiency reserves

Any sus-
tained budgetary leeway available over and
above the safety margins could be used in
future to lower taxes and social contributions,
rather than choosing as in the recent past to
use positive fiscal shocks primarily to boost
spending.

For example, the Federal Employ-
ment Agency could consider lowering the con-
tribution rate, thus dampening the additional
increase in its reserves which is currently
expected.

Another option would be to reduce
the solidarity surcharge. This add-on to various
taxes imposed by the Federal Government gen-
erates extra revenue of 1⁄2% of GDP, whereas
the special-purposes grants to the east German
federal states, which were given as the reason
for introducing the surcharge, are now low in
comparison and will have been phased out by
the end of the decade.