Cash is king no more in Germany as cards gain ground
Cash is king no more in Germany as cards gain ground
The Bundesbank has been a staunch advocate of cash in the face of a global shift to electronic forms of payment such as debit cards and an international debate about the idea of digital-only money issued by central banks.
But a survey of about 2,000 people by the German central bank showed debit and credit cards were gradually gaining ground in the country, even if cash remained the country’s favorite form of payment.
“Cash remains the most popular, but card payments are increasing,” Bundesbank board member Carl-Ludwig Thiele said.
Cash accounted for 47.6 percent of German transactions by volume last year, down from 53.2 percent three years earlier and below the half mark for the first time since polling started in 2008, the survey showed.
Cards grabbed a 39.4 percent market share last year compared to 33.4 percent in 2014, mirroring a global trend that has long taken hold in many other countries including Sweden and Britain.
Internet payments also grew but still accounted for a modest 3.7 percent of total volume.
Germans and Austrians are the biggest users of cash among countries in the euro zone’s richer “core,” according to a recent study by the European Central Bank (ECB).
This preference has been associated with worries about privacy and a deeply ingrained diffidence toward the state, which some trace to the era of the Nazis and of communist East Germany.
The Bundesbank survey found most Germans thought that cash was useful to teach children about the use of money and to ensure a better control of one’s personal finances.
The vast majority also believed the abolition of notes and coins would cause problems to parts of the population, such as the elderly, while only just over a third saw it as a way to fight tax evasion and money laundering.
Speaking at the same conference, the Bundesbank’s president Jens Weidmann said getting rid of cash or replacing it with digital money issued by central banks would be the “wrong response” to the challenges faced by central banks at times of low inflation.
The idea of a digital currency giving holders a direct claim on the central bank is under study by Sweden’s Riksbank and has been touted by some academics as a way to extend the reach of monetary policy when interest rates on deposits are below zero.
But Weidmann rejected it and defended the use of cash and means of payments that go through commercial banks.
“(Getting rid of cash) would be the wrong, completely disproportionate response to the policy challenges of the zero lower bound,” he said.
“The same goes, obviously, for the introduction of digital central bank money with the aim of crowing out cash and enforcing negative rates across the board.”
He echoed the ECB’s view that giving depositors an option to hold money directly at the central bank would worsen bank runs at times of trouble. Weidmann added that it was up to central banks to promote more efficient payment systems that would quash the appetite for private digital tokens such as Bitcoin.
A German government plan to push for an upper limit of €5,000 to cash payments met fierce resistance two years ago, including by the country’s own central bank.
And the Bundesbank mounted a lonely opposition around the same time to the ECB’s move to retire the €500 note, its highest denomination, due to suspicions it was used by criminals. Thiele said on Wednesday he still hoped the purple bill would make a comeback when a new series of euro banknotes is unveiled.
Jordanian cabinet approves new IMF-guided tax law to boost finances
AMMAN: Jordan’s cabinet on Monday approved major IMF-guided proposals that aim to double the income tax base, as a key part of reforms to boost the finances of a debt-burdened economy hit by regional conflict.
“When only 4 percent of Jordanians pay (personal) income tax, this may not be the right thing,” Finance Minister Omar Malhas said in remarks after the cabinet meeting, adding the goal was to push that to eight percent. The draft legislation was submitted to parliament.
The IMF’s three-year Extended Fund Facility program aims to generate more state revenue to gradually bring down public debt to 77 percent of GDP in 2021, from a record 95 percent.
A few months ago Jordan raised levies on hundreds of food and consumer items by unifying general sales tax (GST) to 16 percent — removing exemptions on many basic goods.
In January subsidies on bread were ended, doubling some prices in a country with rising unemployment and poverty among its eight million people.
The income tax move and the GST reforms will bring an estimated 840 million dinars ($1.2 billion) in extra annual tax revenue that will help reduce chronic budget shortfalls normally covered by foreign aid, officials say.
Corporate income tax on banks, financial institutions and insurance companies will be pushed to 40 percent from 30 percent. Taxes on Jordan’s phosphate and potash mining industry will be raised to 30 percent from 24.
The government argues the reforms will reduce social disparities by progressively taxing high earners while leaving low-paid public sector employees largely untouched.
“This is a fair tax law not an unfair one,” said Malhas, who shrugged off criticism the law is lenient on many businesses connected to politicians whose transactions are not subject to tax scrutiny.
Husam Abu Ali, the head of the Income and Sales Tax Department, said a proposed IMF-recommended Financial Crime Investigations Unit will stiffen penalties for tax evaders. Critics say it will not tackle pervasive corruption in state institutions.
Abu Ali said the government could be losing hundreds of millions of dollars through tax evasion, which is as high as 80 percent in some companies.
The amendments lower the income tax threshold and raise tax rates. Unions said the government was caving in to IMF demands and squeezing more from the same taxpayers.
“It is penalizing a group that has long paid what it owes the state,” the unions syndicate said in a statement.
“It imposes injustice on employees whose salaries have barely coped with price hikes rising madly in recent years.”