German corporate tax-cut plan under attack

10th February 2005, Comments 0 comments

10 February 2005, BERLIN - The German government's proposal to cut corporate taxes took a beating onThursday in the nation's media where it was termed flawed and unlikely to win approval. In a move seemingly timed to deflect attention from post-1933 record unemployment, with over 5 million jobless, Economics Minister Wolfgang Clement unveiled the idea on a TV talk show. Germany's corporate tax rate of almost 39 percent is among the highest in the world with steeper rates only in some US states such as New

10 February 2005

BERLIN - The German government's proposal to cut corporate taxes took a beating onThursday in the nation's media where it was termed flawed and unlikely to win approval.

In a move seemingly timed to deflect attention from post-1933 record unemployment, with over 5 million jobless, Economics Minister Wolfgang Clement unveiled the idea on a TV talk show.

Germany's corporate tax rate of almost 39 percent is among the highest in the world with steeper rates only in some US states such as New York, and in Japan.

Chancellor Gerhard Schroeder has past months expressed alarm over a series of sharp corporate tax cuts in new European Union member states.

Estonia has cut corporate taxes to zero, while Latvia has reduced them to 15 percent, Hungary to 18 percent and Poland and Slovakia to 19 percent.

But Germany's tax cut proposal, which is still being hammered out, is deeply flawed, said the heavyweight Frankfurter Allgemeine newspaper.

The problem, said a the paper in a commentary, is that Schroeder only wants to provide tax relief to small and medium-sized companies. In addition, the only profits which are to be given tax relief are those which firms pledge to reinvest.

"Every finance minister knows that splitting tax rates - something that Germany has a lot of experience with - leads to a chain-reaction of undesired reactions and special dodges to save on taxes," said the Frankfurter Allgemeine.

The conservative daily Die Welt - which almost always takes an anti-Schroeder line - said the Chancellor would have a very hard time selling any corporate tax cuts to members of his left-leaning Social Democratic Party (SPD).

Even if a deal is worked out, it will still require approval of the opposition conservative dominated upper house of parliament, the paper noted.

Given Germany's 2006 general elections there is little chance of any movement on taxes until after election day, said Die Welt, adding that the proposed corporate tax cuts might be on the agenda for 2007 and 2008 if Schroeder is reelected.

DPA

Subject: German news

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