Germany: Thüringen Threatens To Block Tax Cut Plans

by Ulrika Lomas, Tax-News.com, Brussels

27 November 2009

The tax cut proposals of the German government, which include plans to reduce the value-added tax rate (VAT) for hotels, have recently met with increased opposition, as officials from the German state of Thüringen have publicly announced their discontent, and have called for urgent changes to be made.

According to Thüringen’s Finance Minister, Marion Walsmann, Thüringen is planning to reject the government’s much-trumpeted growth acceleration law.

Thüringen has already made known that it will not agree to any measures that will result in a loss in revenue for the state, Walsmann added. The local Finance Minister also lamented the fact that only large companies were due to benefit from the tax initiatives contained in the law, and the state has called for measures that will benefit medium-sized companies.

According to Thüringen’s Finance Ministry, the government’s growth acceleration law will generate losses for the state of around EUR70m per year. The reduced VAT rate for hotels alone is expected to result in losses of around EUR11m.

The German government is hoping to reduce the VAT rate in the hotel industry from 19% to 7%.

Schleswig-Holstein has expressed its dismay recently over the proposed measures, and has also threatened to veto the law in the upper house of parliament.

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