German Lawmakers Ponder Financing Of Corporate Tax Cut

by Ulrika Lomas, Tax-News.com, Brussels

19 April 2005

Chancellor Gerhard Schroeder's plans for a cut in the basic rate of German corporate tax have run into trouble after opposition lawmakers told the government that better ways of financing the tax cut must be found.

"We won't accept any company tax cuts financed on credit," Bavarian Finance Minister Kurt Faltlhauser told Sueddeutsche Zeitung in an interview.

"According to our estimates, the financing is only enough to cut corporation tax to 22 percent," he stated.

In a move supported by the conservative opposition, Schroeder last month announced a cut in corporate tax from 25% to 19%, which the government had hoped could be approved in time before parliament recesses for the summer.

Responding to the opposition claims, Finance Minister Hans Eichel, the chief architect of the tax cut plan, told Reuters that it is now up to the opposition to come up with financing solutions.

After shelving a proposal to increase dividend taxes, Eichel is said to favour a cut in tax on property sales by companies, which government tax experts believe will encourage more transactions and increase revenues from the tax.

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