German Towns Warn Coalition Against Abolition Of Trade Tax

by Ulrika Lomas, Tax-News.com, Brussels

07 October 2009

With tax revenue dwindling, and expenditure rising as a result of the global economic downturn, local towns and municipalities in Germany have urged the newly elected Coalition parties not to abolish trade tax in Germany.

Indeed, according to Gerd Landsberg, head of the town and local authority federation (DStGB), any proposals to abolish the country’s trade tax would be perceived as a declaration of war. The German congress of local authorities (der Deutsche Städtetag) has also called for the future government to maintain trade tax as the main source of income for communities.

Representatives of towns and local authorities are concerned that the newly elected Free Democrats are planning to replace trade tax with tax increases in other areas.

Up until now, Germany’s former Grand Coalition government had created a wider tax base for the tax, aware that towns and municipalities contribute greatly to public investment, and are dependent therefore on a stable source of revenue.

Even so, trade tax revenues have continued to decline recently as a result of the international economic crisis, falling by 15% in the first half of 2009. Indeed, the local authority budget deficit has risen to around EUR4.2bn this year, and is set to soar in 2010 and 2011.

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