German Opposition Digs In Over Capital Gains Tax

by Ulrika Lomas, Tax-News.com, Brussels

11 July 2002

Germany's Opposition Christian Democrat party has announced that if successful in the September general election, it plans to reintroduce a capital gains tax on the sale of equity stakes by large companies in other firms.

The tax was removed by the Social Democrats soon after they came to power four years ago, and was designed to change the German corporate landscape by untangling the cross-shareholdings binding the country's large companies and banks together.

In the actual event, only a few companies have taken advantage of the tax break, but any move to reintroduce CGT on the sale of substantial shareholdings is still likely to cause controversy.

The Financial Times reported this week that Friedrich Merz, the CDU's finance spokesman and the head of the party's parliamentary group, has hinted that the tax could be introduced in January 2004 as part of a wider programme of tax reform, if the party achieves election success.

Although the Christian Democrats have previously stated that the need for CGT on cross-shareholding disposals would be reviewed if they come to power later this year, this is the first time that they have positively stated that the tax would be reintroduced.

According to the FT, the Social Democrat government has criticised the CDU's proposals, arguing that they would reverse a move designed to support efficient and flexible companies.

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