Tax-free financial reserve planned for SMEs

As was reported by the Financial Times Deutschland (FTD) with reference to allegations of top-political circles, the Federal minister of Finance, Mr. Peer Steinbrück, intends to introduce a tax-free financial reserve for small and medium-sized entities (SMEs). These companies would be allowed to create reserves of up to 100.000 Euros not subject to taxation, if this sum was to be spent on investment later on. By this measure Steinbrück wants to compensate SMEs, which represent 85 percent of all German companies and are levied income taxes of up to 42 percent, for the planned reduction by 50 percent of corporate tax to be paid by major enterprises.

In addition, Mr. Steinbrück plans to keep the trade tax, but in future wants to include all debit interest in the determination of the taxable base for the trade tax and not 50 percent as in the past. In turn he is said to leave the amount of rent and lease payments to be included in the taxable base at 50 percent. In addition, the so-called tax indicator used in the calculation of the trade tax would be decreased from five to four percent. According to the FTD, the new financial concept of the minister would levy more taxes from savers. Thus, from the year 2008 onwards the withholding tax is scheduled to be increased from 25 to 30 percent. The original text is available here. GERMAN