Germany's Deutsche Post Maintains Tax Privileges

by Ulrika Lomas, Tax-News.com, Brussels

04 June 2009

Germany’s mail giant Deutsche Post looks set to maintain its monopoly on German postal services for the time being, as the government has called for an end to negotiations on the withdrawal of the company’s special tax privilege: exemption from turnover tax.

Although a new law regarding the taxation of postal service turnover was originally due to be adopted by the German government before the summer recess, the controversial debate will now only resume in September, following the elections.

The recent decision was taken as a result of political bartering between the Coalition parties. Representatives of Chancellor Angela Merkel’s Christian Democratic Union party agreed to renege on plans to deprive the mail giant of its tax privileges in exchange for an agreement from the Social Democratic Party to reduce agrarian diesel tax in support of farmers.

Referring to a ruling from the European Court of Justice, stipulating that turnover tax in Germany must be amended in order to ensure equality for all postal service providers, a spokesman from Deutsche Post acknowledged that a change in the law will undoubtedly take place in the foreseeable future.

A change in the current tax law in accordance with the European ruling would mean in principle that all postal service providers would benefit from VAT exemption, provided that they are able to offer an extensive nationwide service at a standard price.

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