Germany Unites On Tax Simplification

by Ulrika Lomas, Tax-News.com, Brussels

07 December 2010

Germany’s coalition government has reportedly united on 41 fiscal measures, designed to simplify the country’s tax law, and amounting to around EUR590m – EUR90m more than Germany’s Finance Minister Wolfgang Schäuble had initially planned.

With the emphasis clearly on reducing the tax burden for employees, plans to increase the tax-deductible business expense allowance from EUR920 to EUR1,000, mark the corner stone of the government’s reform plans. The measure is expected to result in lost fiscal revenues of approximately EUR330m. Taxpayers will also be required in future to submit fewer business expense receipts.

Confirming the government’s intention to increase the current business expense allowance by EUR80, financial expert of the ruling Free Democratic Party (FDP) Volker Wissing expressed his hope that the measure will enter into force in Germany from January 1, 2011, noting that this date is achievable.

Other key initiatives for reform include plans to reduce unnecessary bureaucracy and to simplify and to speed up procedures, by issuing pre-completed tax return forms to taxpayers and by offering individuals the option of submitting their tax returns every two years, without being disadvantaged. This measure is specifically designed to benefit those whose earnings are approximately the same each year.

For individuals eager to set up or to purchase a business abroad, the government aims to relax existing requirements. Under the current proposals, individuals will have up to six months to inform the German tax authorities, instead of one month, as is currently the case.

Leaders of the coalition government are expected to formally adopt the proposed measures on December 9.

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