Deutsche Bank Fears New German CGT

by Ulrika Lomas, Tax-News.com, Brussels

27 June 2002

After German Chancellor Helmut Schroeder pushed through capital gains tax changes last year, some commentators expected a bonanza for the capital markets as German companies took advantage of the new regime to dismantle the intricate web of crossholdings that makes up Fortress Germany and stands in the way of Europe-scale consolidation in many industrial sectors.

They were to be disappointed in the main, as economic uncertainty and equity market fragility dampened the desire for change among leading companies. But some companies at least have made immediate use of the new legislation, notably Deutsche Bank, which is using the $15bn proceeds of its sale programme in part to finance a $4bn share buy-back offer in an attempt to underpin its sagging share price.

The main reason for Deutsche Bank's eagerness to sell, however, is the fear that a new German government this year might reverse the tax changes and re-impose a capital gains tax. Giving his first media briefing since becoming Chairman a month ago, Josef Ackermann said: "I cannot rule out the possibility that a tax may colme some time after September. I don't want to be hit by that."

Bavarian Premier Edmund Stoiber, likely to be the next German Chancellor according to opinion polls, has said he would review the capital gains tax regime if returned to power in the autumn.

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