Germany Plans Tax Package Before Elections

by Ulrika Lomas, Tax-News.com, Brussels

30 March 2010

Germany’s coalition government intends to adopt an “Innovations package”, containing a number of tax initiatives designed to benefit businesses, ahead of state elections in North Rhine-Westphalia.

According to reports, the proposals, due to be adopted by the German cabinet on April 21, include a raft of initiatives, notably tax cuts for businesses and investment in education. Key tax measures are thought to include tax credits of up to EUR1.5bn accorded to research companies, as well as grants for gifted and talented students.

Under the plans, depending on their size, businesses would be able to deduct between 5% and 15% of research staff costs from their taxable base. Such benefits could, according to calculations from the Christian Democratic Union (CDU) party, amount to around EUR4.5bn per year over the course of the next few years. German Finance Minister Wolfgang Schäuble has suggested that the proposed tax relief measures could be assimilated in the reform of the country’s taxation.

Recent opinion polls reveal that the CDU- and Free Democratic Party (FDP)-led government in North Rhine-Westphalia is currently facing defeat in the forthcoming elections on May 9. Without a CDU/FDP presence there, the federal coalition government would no longer have a majority in the upper house of parliament.

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