German Opposition Says It Would Increase Corporate Taxes

by Ulrika Lomas, Tax-News.com, Brussels

21 February 2002

The Christian Democratic Union, the German Government's major political opposition, has made the surprising announcement that if elected, the party would increase taxes on Germany's major corporations.

Peter Rauen, the Deputy Leader of the CDU in Parliament pitched his lot firmly in with the country's 'Mittelstand', or small and medium sized business sector, by announcing that inequalities in tax treatment between large corporations and smaller companies were 'unacceptable'.

'It's essential to restore equality of taxation independent of legal corporate status,' he explained.

Mr Rauen accused Finance Minister, Hans Eichel, of implementing more marked cuts in corporate income tax for large enterprises, and pointed to a drop in corporate income tax revenue last year, when the German Government actually paid out more in corporate tax refunds to big companies than it took in as corporate tax payments.

He revealed that if the Christian Democratic Union is successful in the forthcoming election, it intends to cap allowable losses carried forward, and reduce the tax breaks afforded to large companies on capital gains.

Meanwhile, Hans Eichel finds himself in a somewhat sticky position this week, with slow growth and dwindling tax revenues making last week's commitment to the EU to bring the country's budget deficit 'close to balance' by 2004 an even more daunting prospect.

Experts suggest that a cut in spending over the next few years is the only way that the ruling coalition Government is likely to achieve such a feat, as any move to increase taxes would be seized upon by the opposition as an indication of the failure of its economic policies.

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