German minister mulls tax block to executive bonuses

17th January 2008, Comments 0 comments

Peer Steinbrueck considers punitive measures for companies that dole out excessive severance packages.

Berlin (dpa) - Amid debate in Germany over sharp rises in executive pay, Finance Minister Peer Steinbrueck said Wednesday he would consider taxing companies for making excessive severance payments.

Steinbrueck, whose aides have criticized such plans in the past, gave few details of the new thinking and did not say if the proposal had been checked with Chancellor Angela Merkel and her Christian Democrats.

In an advance written text of a speech Wednesday evening to an event hosted by Dresdner Bank, he said a British-style cap on the corporate tax deductibility of such payments was worth considering.

"If the chief executive of a company sends the share price to rock bottom and then fights to obtain double-digit millions of euros in severance pay for himself, I cannot sympathize at all.

"Some of these people have lost touch with reality," the Social Democratic minister's text said.

Previously, the Berlin Finance Ministry has dismissed suggestions that corporate revenue tax could be applied to such payments, saying the tax system ought not to try to distinguish "good" from "bad" corporate expenditure.

Much of the German debate on accelerating executive pay rates has focussed on the demands by sacked chief executives for "golden handshakes" or full payouts to the ends of their contracts even if they do not work any more.

Groups on the left of Merkel's CDU favour some kind of cap on severance payments as well as taxing the payouts.

Social Democratic parliamentarians in Berlin have been drawing up proposals to put to the Merkel government.

Steinbrueck said he did not believe the executive pay debate was a fad which would die out.

The issue would continue to occupy Germans, but could not ultimately be tackled by legal changes but rather by changing mentalities.

"We need to establish a culture of moderation and of setting a good example in the executive ranks of our companies," he said.

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