By Lena Unbehauen - 28th September 2006
Germany is heading for confrontation with the European commission over new tax rules for cross-border businesses.
German finance minister Peer Steinbrück will introduce two new taxes on companies operating in several coutnries, despite opposition from Brussels.
The first would increase taxes on the domestic holdings of European companies in Germany that move part of the business to other EU countries.
Under current tax rules, EU member states have no right to recover taxes levied on companies’ foreign subsidiaries, and the increase in domestic taxation is designed to compensate for this lost revenue.
Berlin is convinced that other countries, in particular the UK, the Netherlands, Italy and France, will back its stance.
“Other EU states plan to introduce similar laws,” Steinbrück’s spokesman told the German paper Handelsblatt.
But the move appears to contravene EU rules, set out in the case law of the European court of justice, which state that companies must be treated in the same way whether they choose to relocate within their own country or abroad.
Germany in particular has been hit by companies relocating all or part of their businesses to the newer member states in central and easten Europe, where costs are considerably lower.
The second controversial measure concerns international mergers.
Steinbrück wants to introduce new rules that will stop loss-making companies transferring their losses to their new parent when they are taken over.
“In this way we want to stop foreign companies importing their losses into Germany,” the spokesman said.
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