The findings of a study undertaken by Ernst & Young and the Centre for European Economic Research has suggested that the tax gap between Germany and the new member states of the European Union will continue to grow unless Berlin cuts rates in the years ahead, the Financial Times reports.
With Lithuania, Latvia, Hungary, Slovakia and Poland having cut company taxes in recent months in a bid to attract foreign investment, and with the Czech Republic and Estonia planning further cuts, competition is hotting up for foreign investment and the study predicts the gap in the effective tax rate between the old and new EU states will increase.
"Investments in new member states can considerably reduce the tax burden of German companies,” the study observed.
The research concluded: "The distance between Germany and the new EU member states will keep growing."
Effective corporate tax rates for a German company doing business in a new EU member state this year ranged from 34.62% in Malta to 15.03% in Lithuania, according to the FT. The effective tax rate in Germany meanwhile, was 36%.
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