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German Businesses Call For 25pc Corporate Tax Rate

Thursday, February 6, 2020

The Federal Association of German Industry, the BDI, has urged the German government to forge ahead with corporate tax reforms, warning that Germany's corporate tax regime is becoming increasingly out of step with the country's competitors.

"The lack of action and lack of ideas of the federal government in tax policy is becoming an ever greater location risk for companies. Tax reforms in the USA and in many European countries mean that Germany is under massive and growing competitive pressure," said BDI general manager Joachim Lang in a statement issued on January 27, 2020.

"As of next week, the United Kingdom will also seek tax competition with Germany and Europe," Lang added, referring to the UK's impending exit from the European Union on January 31, 2020.

According to Lang, companies in Germany face an average corporate tax rate of 31 percent, compared with 22 percent in the EU, and he called on the Government to target a corporate tax reduction that would establish an effective tax burden of 25 percent.

A plan to limit the level of corporate tax for SMEs to 25 percent and ensure their overall tax burden does not exceed 45 percent was announced by Economy Minister Peter Altmaier in August 2019. However, while Chancellor Merkel expressed support for this plan in an address to employers in November last year, repeated calls for corporate tax cuts have seemingly been resisted by the Finance Ministry.

"After more than ten years of standstill, the Federal Ministry of Finance can no longer refuse to reform corporate taxes," Lang continued, noting that there is also "an abundance of smaller and larger measures that politicians should tackle."