Sweden Finland Austria

participate.
GERMANY
Taxation
The German personal taxation scheme was changed considerably in 1996 following the
rulings of the Constitutional Court. The non-taxable income was increased to 12,095
DEM, up from 5,616 DEM. The tax schedule was changed for taxable income up to 55,727
DEM in such a way that average taxation was lowered (result of the increased non-taxable
income) and marginal taxation increased. From taxable income of 57,727 DEM and up, the
new scheme is identical to the old. There were no changes in 1997, and only minor
changes in 1998. The tax reform from January 1999 implied substantial tax reductions for
families with children.

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The social contributions also increased in 1997, where they in average were 21.05 per cent
of the wage (the employee paid contributions), up from 20.2 in 1996. There were no
changes in 1998.
Illness
The obligation (the legal foundation) for employers to pay full wages for the first 6 weeks
of illness was changed to payment of 80 per cent of the former wage in the fall 1996. The
obligation is, however, also implemented in the labour market agreements so it is up to the
negotiators to change the current agreements partly or completely. It will take some time
before there is a significant impact from the change.
The gross compensation percentage in the public insurance scheme was lowered from 80
per cent to 70 per cent of the former wage, with the ceiling that the compensation cannot
be larger than 90 per cent of the lost income after tax.
Disability
The two German schemes for disability pensions (Erwerbs- and Berufsunfähigkeit) will be
replaced by a uniform scheme from year 2000.
Pensions
Minor changes were implemented in 1998 with the main implication that indexing of
pensions in future also will take 
the demographic factor' into consideration.
Family allowances
The German family allowances were changed fundamentally, also following the rulings of
the Constitutional Court. There is now (from 1996) a refundable tax credit per child for
families with children. The tax credits are 2,400 DEM/year/child for child no. 1 and 2,
3,600 DEM/year/child for child no. 3, and 4,200 DEM/year/child for child no. 4 and more.
This scheme is quite similar to a cash benefit, the tax credit is implemented each pay day,
and if there is no taxation, the tax credit is paid out in cash. In 1997 the credits were 2,640
DEM/year/child for the first 2 children, the other credits were unchanged. There were no
changes in 1998, but further increases in 1999.
Alternatively there is an allowance of 6,264 DEM/year/child in taxable income (6,912
DEM per child in 1997 and 1998). The family will have the allowance, if that is advanta-
geous compared with the tax credit. That will only be the case for families with relatively
high incomes, where the deductible allowance will have its highest value due to the pro-
gression in the German personal taxation scheme. It should be mentioned that the deduct-
ible allowance is used for all families with children, when the solidarity and church tax is
calculated (church tax is not included in the tax calculations in ’Elements’).

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The NETHERLANDS
Taxation
Personal taxation in the Netherlands was, generally speaking, lowered somewhat in 1997
compared to 1996.
Illness
The complete scheme for sickness benefits was privatized in 1996, implying that the
employers took over the responsibility for and financing of the scheme. It is now up to the
employers to control the scheme within the legal frame work and reap possible savings
from that.