Past Tenses Past Perfect Simple

had + Participle II

• Action referring to an earlier past:

He got the loan but unfortunately the court had declared him a bankrupt.

They started discussing their budget as soon as the Chief Executive had arrived.

He was excited because he had never taken part in such representative meetings.

• Action referring to unfulfilled hopes and wishes with verbs expect, hope, mean, suppose, think, want:

I had hoped to return the loan in time, but I didn’t manage to do it.

Past Perfect Continuous

Had been + Participle I (V_ing)

• Action in progress throughout a period:

They looked very tired because they had been making a very important order days and nights.

Read text II about the attempts of German politicians to change tax system in the country.

Will Germany Start Tax Reform?

Paul Kirchhof, a lawyer at Heidelberg University tried to persuade Germany that the country's tax system needs radical reform. He suggested the country would do away with most tax exemptions and cut the top marginal income-tax rate to 25%.

Angela Merkel said that she did not expect tax reform this year.

That Germany badly needs tax reform has been recognised for years. What is new is the attention being paid to simplicity, which is popular with voters. Hardly a day passes without a politician demanding that tax returns be made no larger than a "beer mat", or quoting the claim that Germany produces over two-thirds of the world's academic tax literature. Germany is hardly the only country to suffer from fiscal complexity. But marginal and average tax rates are high, especially for companies. That matters, as it makes the country a less attractive place in which to invest. Other countries have responded to a similar lack of competitiveness by lowering marginal tax rates and scrapping tax breaks, broadening the tax base and simplifying the system. But Germany has managed only incremental reforms. These have left a patchwork that, says the German council of economic experts, "is fast losing any semblance of being a structured, rational system".

One often cited explanation for this is Germany's federal system, which gives the opposition a de facto veto over tax changes. Less well known is the role of the country's Constitutional Court, says Steffen Ganghof, a researcher at the Max Planck Institute for the Study of Societies in Cologne, in a forthcoming book. The court often has the last say in tax policy. It is widely assumed that it would strike down any law openly breaking with one tradition of German taxation: those corporate- and income-tax rates must be about the same. Combined with the Gewerbesteuer, a court-protected local trade tax, this has meant that politicians are limited in their ability to respond to tax com­petition without losing revenue.

The CDU*, adds Mr.Ganghof, has often proposed bolder tax reforms than other right-wing parties. One recent plan drawn up by Friedrich Merz, a CDU parliamentary leader, would have put Germany ahead of other countries in simplicity. It suggests three tax rates: 12%, 24% and 36%, for incomes above €8,000, €16,000 and €40,000 respectively. Such radicalism does not make for easy compromises. Despite scrapping many tax breaks, Mr.Merz's plan would cut revenues by €24 billion in the first year – which the government cannot afford. Anyway, the governing Social Democrats (SPD) dislike low tax rates, because they want progressive taxes to balance high social-security contributions, which tax lower incomes proportionately more than higher ones.

More surprisingly, the Christian Social Union, or CSU, the CDU’s sister party in Bavaria, has qualms of its own. It recognises that the CDU's tax ideas do not square with its health-care plans, which would make social-security contributions more regressive. The CSU has come up with a rather less ambitious proposal, which gets rid of some tax breaks and lowers the top rate only from 45% to 39%. So what way will the government choose? One option would be to copy Scandinavian countries by bringing in a "dual income tax" that treats labour and capital income differently. While wages can still be taxed progressively, this allows a flat rate for dividends, capital gains and rents. That would mean taxing capital and labour differently, according to how mobile each is. The CDU could, at least partially, test its flat tax; the SPD and CSU would keep their progressive income tax. But this would not be legal, says Mr.Kirchhof, who once sat on the Constitutional Court.

“The Economist”

*CDU – Christian Democratic Union.

COMPREHENSION CHECK

Exercise 1. Match the definitions with the words from the text.

1. competitiveness	a. increasing
2. incremental	b. to make smth. die or become so bad that it can exist no longer
3. semblance	c. refusal from cutting the tax rate
4. right-wing parties	d. reduction of the tax rate
5. strike down	е. a thick piece of card that you use for putting your drink on esp. in a bar
6. exemption	f. if one idea, opinion, explanation is in conformity with another, they both seem good or reasonable
7. beer mat	g. difficult nature of smth. which may be hard to understand, to do, to deal with
8. oft-sited	h. the most conservative parties
9. tax break	i. thoughts that what you are doing might be bad or wrong
10. marginal tax rate	j. the ability to compete in markets for goods and services
11. patch work	k. the situation in which smth. only appears in a small amount
12. complexity	l. permission to ignore smth. such as a rule, obligation, payment
13. academic tax literature	m. mostly referred to
14. tax return	n. smth. in great disorder, chaos
15. scrapping tax breaks	o. manuals and books devoted to tax problems
16. to square with	p. additional tax paid on each unit in the revenue increased
17. qualms	q. a report by a taxpayer to the tax authorities of his or her income

Exercise 2. Read the text again and complete the following sentences:

1. Germany badly needs tax reform because … .

2. Marginal and average tax rates are very high for … .

3. Other countries attract foreign investments by … .

4. Now German system of taxation is far from … .

5. The complexity of German tax system is explained … .

6. The main opponent of breaking a tradition of German taxation is … .

7. The main traditional law in tax system says that … .

8. Friedrich Mezz suggests 12%, 24% and 36%tax rates for … .

9. That tax system if introduced … .

10. People with less incomes pay tax … .

11. Duel income tax … .

Exercise 3. Insert the proper word.