German Cabinet Adopts Proposals For Lower Corporate Tax

Tax rate will fall to 29.8% from 28.7% if approved.

The German government on March 14 adopted draft proposals for a reform of corporate taxation that would lead to a big cut in company taxes from next year. Under the draft law put forward by Finance Minister Peer Steinbrueck companies will see their tax rate cut to 29.8% from 38.7% at present from 2008.

"We want to make Germany more attractive as a site for investment and stop the erosion of the tax base," Steinbrueck said, insisting that reform was urgently needed. "Some people argue that we'll lose (tax revenues) from this reform. But we'll lose those revenues if we don't implement it," the minister argued.

Steinbrueck also rejected criticism that companies were likely to invest the money they saved on their tax bills abroad instead of in Germany.

The changes are expected to benefit large companies in particular. Economy Minister Michael Glos said that the proposed reforms would send a clear signal to German companies and foreign investors, even if he regretted that small and mid-sized companies, which form the backbone of the German economy, would not benefit more from the changes.

Copyright Agence France-Presse, 2007

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