Eichel Announces Shelving Of German Dividend Tax Hike

by Ulrika Lomas, Tax-News.com, Brussels

13 April 2005

A plan to raise the rate of dividend tax in order to offset the revenue loss from Germany’s proposed cut in corporate tax has been dropped, according to Finance Minister Hans Eichel.

In a speech in Frankfurt last week Eichel revealed that: "In my view the procedure whereby the income derived from share-based investments is halved for tax purposes will remain unchanged.”

"I consider that to be an important contribution to the calculability of our taxation policies for investors in the current situation,” he added.

Eichel is said to a favour a solution whereby the rate of tax on sales of property by companies will be halved, a move which government tax experts believe could actually increase revenues by EUR750 million by encouraging more transactions.

However, Eichel’s talks with opposition lawmakers, upon whom the government depends for support for its tax plans in the upper house, have failed to provide an immediate remedy to the problem of funding the corporate tax cut. Nonetheless, he appears to be optimistic that the tax cut can be legislated by the summer break.

Speaking before the Bundestag, or lower house of parliament, last month, Chancellor Gerhard Schroeder unveiled a package of measures which included a cut in corporate tax from 25% to 19% and the broadening of a small business loan programme.

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