Germany, Britain compromise over 'patent box' tax breaks

11th November 2014, Comments 0 comments

Germany and Britain have reached a compromise in their dispute over controversial tax breaks for intellectual property, the German finance ministry announced Tuesday.

After tough negotiations just days before a meeting of the Group of 20 or G20 nations in Brisbane, Australia, Berlin and London agreed on a joint proposal on the issue of so-called "patent box" tax breaks, the ministry said in a statement.

Patent boxes are incentives introduced by Britain last year offering tax rebates to companies on patented research.

Other countries such as Ireland also offer similar incentives.

But Berlin believes the practice -- where the tax breaks are offered to companies engaged in R&D (research and development) activity -- encourages companies to artificially shift profits to those countries with such patent boxes.

The issue has become a key sticking point in the drive, under the aegis of the Organisation for Economic Cooperation and Development (OECD), for international tax reform and the global fight against tax evasion.

Under the compromise now reached, the rebates will apply only to the actual R&D activity in the country concerned.

German Finance Minister Wolfgang Schaeuble said that "more and more countries oppose affording too much tax freedom to large companies.

International companies, like other firms, must make their contribution to funding the public budget.

" British finance minister George Osborne described the deal as "a good result for Britain," saying it allowed London to protect research, while at the same time helping to ensure there are international rules against harmful tax practices.

The fight against tax evasion will be high on the agenda of the G20 meeting in Brisbane at the end of this week.

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© 2014 AFP

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