Germany May Change Tax Rules In Response To Vodafone Claim

by Ulrika Lomas, Tax-News.com, Brussels

17 June 2004

A senior member of Germany’s ruling Social Democrat Party has revealed that changes are being considered to the country’s tax laws in the wake of Vodafone’s attempt to claim a 20 billion euro tax credit from the German authorities as a result of losses incurred after its takeover of Mannesmann.

Under a change to German tax law in 1999, firms were permitted to write down the value of assets to achieve a tax saving only if it could be shown that these assets had been permanently devalued.

However, in the Vodafone case, the Finance Ministry has argued that its claim was based on a temporary price swing rather than a permanent depreciation in value.

Speaking to Reuters, Joachim Poss, a deputy leader of the party’s parliamentary group, revealed that the SPD are exploring ways in which the system can be further tightened, including limiting the amount of losses firms can offset against their tax bill to 50% instead of 60%.

"We are examining whether such an initiative makes sense," Poss told the news agency.

Likely support for such limiting measures from opposition conservative parties, who control the Bundesrat, would also smooth its passage through parliament.

Vodafone’s case is currently being considered by the tax authorities of the state of Nord-Rhein Westphalia.

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