BERLIN (Reuters) - Finance Minister Wolfgang Schaeuble is open to reforming the German tax system in a way which would cut the tax bill for many, provided the budget allows it, a magazine reported on Sunday.
Record tax revenues have triggered calls from some conservatives to change the mechanism of so-called "cold progression", under which income tax brackets are not adjusted for inflation. The Finance Ministry ends up taking in billions of euros in extra revenues as a result.
"As soon as there is room in the budget and there is a willingness between all the coalition partners to tackle the subject of cold progression, I am the last one who would stand in the way," Schaeuble told Der Spiegel weekly.
He added that he had always pushed for lowering hidden tax rises resulting from a rigid system.
Many lawmakers in Schaeuble's Christian Democrats (CDU) have long wanted the government to address the issue of rigid tax brackets but there is disagreement with their Social Democrat (SPD) coalition partners.
While Social Democrats don't object to the reform itself, they have argued that it should be financed by raising tax on higher earners. But Chancellor Angela Merkel's conservatives do not want to break their election promise of no tax rises.
Der Spiegel reported some Social Democrats had adopted a softer stance and that their leader Sigmar Gabriel had made clear that the party would no longer insist on a hike in the top rate of tax in return for cuts via a cold progression reform.
Some Social Democrats have said any unexpected surplus in tax revenues should go to repairing Germany's roads and railways.
Merkel's spokesman said this week that there was no room in the 2014 or 2015 budget to tackle cold progression as the priority was budget consolidation.
The issue flared this week following data that showed a 7.2 percent annual rise in March's tax intake to 55.36 billion euros.
The finance ministry also plans to strengthen its efforts to fight money laundering and international terrorism, a spokesman said on Sunday, after the Organisation for Economic Cooperation and Development (OECD) complained about German progress on this.
The finance ministry has approached the appropriate ministries to discuss further steps, said the spokesman.
(Additional reporting by Sabine Siebold; Reporting by Madeline Chambers; Editing by Stephen Powell)