Eichel Dismisses Calls For Minimum Corporate Tax Rate

by Ulrika Lomas, Tax-News.com, Brussels

17 June 2002

Following a dramatic reduction in the amount of revenue collected from German corporations last year, the deputy parliamentary leader of the Social Democrat party (SPD) called last week for a minimum corporate tax rate.

'A minimum tax would mean large variations in corporate tax income would be smoothed out, limiting damaging effects on state budgets,' Joachim Poss explained on Thursday, calling for a debate on the subject.

When corporate tax collections fell, the conservative opposition blamed the SPD's programme of tax reforms. However, the government said at the time that changes in the way dividends were paid by companies, and a generally weak international economic climate were behind the decline.

Speaking at a news conference last week, German Finance Minister, Hans Eichel said that he had rejected Mr Poss' proposal, but admitted that there were flaws in the corporate tax system. However, he suggested that this is the case on a Europe-wide level, and called again for the harmonisation of corporate taxes across the European Union.

'Such a problem can only be dealt with in an international context and that is why I plead for a European corporate tax, the harmonisation of company tax in Europe, which is also the position of the European Commission.' He added that: 'I think a common market, a common currency needs in the long-term a common tax system.'

These remarks are likely to draw howls of outrage from EU member states such as the UK and Ireland, and also from fellow eurozone member, France. French President, Jacques Chirac last week promised to go ahead with promised tax cuts if a centre-right government is elected to support him, despite a pledge to bring the country's budget in balance by 2004.

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