Germany's FDP Seeks End To Tax Perks For Deutsche Post

by Ulrika Lomas, Tax-News.com, Brussels

06 October 2009

The days of tax privileges accorded to Germany’s mail giant Deutsche Post appear to be numbered, as the newly elected Free Democratic Party (FDP) intend to draft a new law this year, guaranteeing equal treatment for all postal services.

Up until now, the German government has granted Deutsche Post exemption from value added tax (VAT) for the dispatch of certain letters and private packages. Indeed, such tax perks give the government’s favoured postal operator a clear advantage over competitors, estimated at around half a billion euros.

Nevertheless, the Union’s new Coalition partner, the FDP, has recently announced its commitment to removing barriers to competition. According to Gudrun Kopp, the FDP’s expert on the postal services, the party is determined to create a fairer system for all postal services. Indeed, Kopp is confident that negotiations on a new law will begin shortly.

Deutsche Post is now resigned to the fact that a new law will be drawn up – and sometime soon. The European Court of Justice ruled earlier in the year that the tax privileges accorded to Deutsche Post were unfair, and had at the time requested an amendment to the law.

It remains unclear as yet, however, as to whether the VAT exemption will be removed for Deutsche Post, or whether it will be extended to all postal services throughout the country.

Despite fears that changes are imminent, amending the existing law is bound to prove a lengthy process.

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