GERMANY'S LOWER HOUSE OF PARLIAMENT APPROVED ON FRIDAY A NEW BUDGET LAW THAT INCLUDES THE COUNTRY'S BIGGEST TAX INCREASE SINCE WORLD WAR TWO, REUTERS REPORTED. THE CENTRE-PIECE OF THE LAW IS A 3 PERCENTAGE POINT INCREASE IN VALUE-ADDED TAX (VAT), WHICH THE GOVERNMENT OF CHANCELLOR ANGELA MERKEL WANTS TO FINANCE A REDUCTION IN THE BUDGET DEFICIT AND A LOWERING OF PAYROLL COSTS. ECONOMISTS HAVE WARNED THAT THE VAT HIKE, WHICH WILL TAKE EFFECT NEXT YEAR AND COST TAXPAYERS AN ESTIMATED 18 BILLION EUROS ANNUALLY, COULD HIT THE GERMAN ECONOMY JUST AS IT IS SHOWING SIGNS OF EMERGING FROM YEARS OF SUB-PAR GROWTH. THE BUNDESTAG LOWER HOUSE VOTED 396 TO 146 IN FAVOUR OF THE LAW, WHICH STILL NEEDS APPROVAL IN THE BUNDESRAT UPPER HOUSE TO GO INTO EFFECT. BECAUSE THE COALITION PARTIES IN MERKEL'S GOVERNMENT HOLD A SUBSTANTIAL MAJORITY IN THE 614-SEAT BUNDESTAG, THEY HAD BEEN WIDELY EXPECTED TO WIN THE VOTE.
