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German Companies Criticize Corporate Tax Hikes

by Ulrika Lomas,, Brussels

14 December 2001

Incorporated companies in Germany are likely to be hit by increases in corporate taxes amounting to around DM300 million ($140 million) per year, it was revealed on Tuesday.

This comes as the result of the adoption of Finance Minister Hans Eichel's revised 'Bill for the Development of Company Taxation Law'. The bill, among other provisions, states that tax relief for restructuring in private partnerships is liable to deadlines, that incorporated companies must pay commercial tax for dividends from diversified holdings of under 10%, and that costs for achieving tax free revenue may not be written of as operating expenses for the purpose of corporate tax calculation. The bill also states that realty transfer tax for transactions within a group will remain in place.

According to the Finance Ministry, the new taxes are due to be adopted by the Bundestag today, and by the Bundesrat next Thursday, and will come into effect from January 2002. The additional revenue raised will go towards financing tax relief for small and medium sized enterprises and towards measures for increasing corporate tax revenue.

However, the revised bill, which received the attention of the Parliament's mediation committee earlier this year following disagreements with the federal state authorities, has not been well received by the German business sector.

The President of the Federation of German Industry, (BDI), Michael Rogowski slammed the revised bill, arguing that it had failed in its stated aim of enhancing company taxation law, and had created a 'local authority coffer financing law' which placed a higher burden on companies rather than giving them relief. 'Whoever acts in this way shatters confidence in calculable tax policy,' he warned.

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