German Government Mulls Short-Term Tax Relief For SMEs

by Ulrika Lomas, Tax-News.com, Brussels

25 February 2005

The German government is considering short-term tax relief measures for German small and medium-sized companies while the Finance Ministry works out a broader package of corporate tax reforms, expected after 2006.

According to a report from Dow Jones Newswires, government officials familiar with the issue have revealed that the Finance Ministry is currently mulling a plan to increase firms’ tax-free reserves for future investments from the current level of 20% of acquisition and production costs.

"A far-reaching reform of the way companies are taxed needs time…and can't be presented in the short-term," one official told Dow Jones, adding that a bill on the short-term measure may be presented within the next few weeks.

Finance Minister Hans Eichel recently told the Handelsblatt newspaper that he is working on new proposals that will simplify the German corporate tax system into a single unified rate, although he indicated that this will not be introduced until 2007 at the earliest.

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