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Germany . A review of the 2014 agricultural diesel tax break By Mariah Monnens, Spencer Tuskowski, and Tyler Hubler. Germany’s Diesel T ax B reak. - PowerPoint PPT Presentation
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Germany A review of the 2014 agricultural diesel tax break
By Mariah Monnens, Spencer Tuskowski, and Tyler Hubler
Germany’s Diesel Tax Break
• Agricultural and forestry sector producers will be able to claim a tax break on diesel consumption from 2014 to 2016, as introduced in an EU meeting in March of 2013• Germany will support firms in the agricultural sector
in the form of tax benefits: €214,80 per 1000 liters of diesel or a total of approximately €400 million per year• We will suggest reasons for not implementing this
subsidy
Economic History
• End of WWII: two separate countries - East and West.
• 1990 after fall of Berlin Wall: economic reunification
• Slow economic growth until mid 2000s
• Switched currency to Euro in 2002• Part of a larger
economy
Important dates and moments
Modern Economy
• $3.4 trillion
One of largest economies
Low and stable inflation
• Weakened currency• Cheaper exports
Switching to Euro from Deutsche Mark
Trading• France, United States, United
Kingdom, Italy, NetherlandsTrading partners
• Transport equipment (including automobiles), electrical machinery, chemicals, some food products and wine
Exports
• Similar, but include raw materials and semi-finished products for industryImports
• Exceeded EU’s 6% threshold• Asked to boost investment and reduce
savings rates• Being blamed for draining European
and global growth
High trade surplus since
2007
The German Agricultural Sector• One of the smallest sectors of the
German economy
• Most policies made by EU and not Germany
• Subsidy and Export Subsidy Programs
• Economic value of agricultural exports is €60.1 billion, growth of 7% since 2011
• Germany is a net-importer of food products
• Germany offers far more tax breaks on use
of fuel compared to other countries such as USA
• 84,858,000,000 pounds of diesel fuel used in 2011
Effect of the Subsidy
Analysis of the PolicyPros
• Consumer and producer surplus gains
• Germans engaged in agricultural or forestry production receive further support in a competitive market
• Benefits to the domestic diesel industry
Cons• Cost (€1,2 billion over
3 years)• Lack of assurance of
the policy’s effects• If prices fall below
world or regional prices for agricultural or forestry products, producers who reside in countries that are strong trading partners with Germany will suffer
ConclusionWe stand by our proposal to end the
subsidy over concerns with its ability to increase agricultural production in Germany
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