German Corporate Tax Revenues EUR1 Billion Below Target

by Ulrika Lomas, Tax-News.com, Brussels

17 August 2005

German corporate tax revenues have undershot the government's target by over one billion euros in the first seven months of the year, according to a leaked Finance Ministry report due to be released on Friday.

The report, seen by Financial Times Deutschland, compares actual tax revenues with mid-year targets set by the government. It reveals that revenues from corporate taxes are 1,006 million euros under expectations.

However, the slack company tax revenues were compensated for by a higher-than-expected increase in personal income tax revenues as overall federal tax revenues reached 223.6 billion euros in the first seven months of the year, 0.4% higher than the government's estimate.

The Finance Ministry's report expects tax revenues to be 410.6 billion euros for the entire year, an increase of 0.3% year-on-year.

Earlier in the year, both the governing Social Democrats and the opposition Christian Democrat Union had attempted to bring about a 6% cut in the headline rate of corporate tax to 19%. However, neither side could agree on how the tax cut should be financed and the plan was effectively shelved.

The CDU has since announced a cut in the basic rate of corporate tax to 22% if they succeed in winning the general election, scheduled for September, reflecting the continuing budgetary constraints that the next government will be required to work within.

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