Germany's Schäuble Seeks Abolition Of Trade Tax

by Ulrika Lomas, Tax-News.com, Brussels

17 February 2010

Eager to abolish trade tax in Germany, the ruling coalition government has appointed a reform commission to examine alternatives to the controversial levy, a major source of income for local authorities.

As stipulated in the coalition agreement, a reform commission is to examine the replacement of the trade tax with a higher proportion of sales tax and a local surcharge levied on both income and corporate tax.

Both the Free Democratic Party (FDP) and members of the the Christian Democratic Union (CDU) party are determined to abolish the trade tax as quickly as possible, criticizing the fact that the relic from the past represents a significant disadvantage to Germany as a business location, and that the tax is levied irrespective of whether or not a profit is realized.

A spokesman for the Finance Ministry announced that, whilst the abolition of the trade tax is desirable, reform will not necessarily result in its abolition, but may in the first instance lead to a further reduction of non-profit related elements of the tax. The coalition government reduced the tax levied on rent and lease payments at the beginning of the year.

Germany’s Finance Minister Wolfgang Schäuble has invited his counterparts from the federal states, along with key representatives from local authorities, to attend the first meeting of the commission, due to take place in Berlin on March 4.

It remains to be seen as yet whether or not this latest attempt to abolish the tax will succeed where others have failed.

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