Germany agrees to controversial tax plan

3rd November 2006, Comments 0 comments

3 November 2006, Berlin (dpa) - Key German political leaders hammered out an agreement Thursday on a five-billion-euro (6.4 billion dollar) corporate tax reform plan, bringing to end a long running battle over the controversial changes which have exposed tensions in Chancellor Angela Merkel's ruling coalition. Finance Minister Peer Steinbrueck, a member of the Social Democrats, joined Hesse state Premier Roland Koch in outlining the reforms Thursday, which include cutting the corporate tax burden from 38.7

3 November 2006

Berlin (dpa) - Key German political leaders hammered out an agreement Thursday on a five-billion-euro (6.4 billion dollar) corporate tax reform plan, bringing to end a long running battle over the controversial changes which have exposed tensions in Chancellor Angela Merkel's ruling coalition.

Finance Minister Peer Steinbrueck, a member of the Social Democrats, joined Hesse state Premier Roland Koch in outlining the reforms Thursday, which include cutting the corporate tax burden from 38.7 per cent to under 30 per cent.

The corporate tax changes, which are due to come into force on January 1 2008, form a key part of the Merkel-led coalition reform plans.

Berlin plans to finance the five billion euros cost of the reforms in part by dismantling tax breaks.

Both Koch and Steinbrueck described the reform as "an enormous step" with the finance minister adding that the moves would help to strengthen Germany's attractiveness to business.

"The direction with the taxation of enterprises reform is correct" said the Federation of German Industry chief Juergen Thumann.

But he said that more details of the changes were needed before a more comprehensive assessment of the proposed reform.

Merkel coalition also agreed to introduce a 25 per cent withholding tax on capital gains on January 1, 2009.

Germany has been under pressure to lower corporate taxes, which are among the highest in the European Union.

This has been given a new sense of urgency by the moves across new EU member states, which joined the Brussels-based bloc in May 2004, to dramatically cut taxes and to introduce flat tax systems.

Aimed in particular at helping to underpin Germany's small-to-middle sized business sector, the draft reforms are due to be presented to parliament by the middle of next year.

DPA

Subject: German news

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