German Tax Amnesty Plans Put On Hold

by Ulrika Lomas, Tax-News.com, Brussels

04 June 2003

The German government announced earlier this week that its plans to introduce a tax amnesty in addition to a single rate of savings interest tax have now been postponed until next year.

Under the terms of the plan, the present tiered system for the taxation of savings interest would be replaced by a single flat rate of 25%- interest income is currently taxed at anywhere between 19.9% and 48.5%. Also, funds held illegally offshore will be allowed to return to German banks without investors facing prosecution.

However, according to German Finance Ministry spokesman Joerg Mueller, the Schroeder administration has decided to postpone the commencement of the amnesty and new interest tax regime until the European Union savings directive has been implemented. The measures were originally pencilled in for a July launch, but this has been put back until January 1st 2004 at the earliest. With final agreement between all member states yet to be reached however, this may be subject to further delay.

Some time ago Chancellor Schroeder estimated that the amnesty would result in EUR100 billion ($117 billion) being repatriated to the country. However in light of this new development, some observers now appear less optimistic. A recent statement issued by the Association of Public Banks expressed disillusionment with the government's decision, arguing that it had made the amnesty "practically irrelevant". Meanwhile, the Association's head, Karl-Heinz Boost, told the AP that "a chance has been missed" to improve Germany's standing as an international financial centre.

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