Press Releases

Clear rejection of planned tax increases

Frankfurt/Berlin, 17 September 2013

“Even if the German economy is currently doing well compared to the rest of Europe, Germany cannot rest on its laurels, and that includes the area of tax policy. Germany cannot afford new increases in taxation and other levies. This applies in particular to the revival of the wealth tax and the introduction of a wealth levy. As a non-earnings tax, the wealth tax would overburden low-earning enterprises, erode investment potential and exacerbate the crisis. Increasing the top rate of income tax would not be any easier at all to swallow,” stressed Klaus Bräunig, Managing Director of the German Association of the Automotive Industry (VDA). He was speaking at the high-calibre IAA symposium entitled “Cars and Taxation” that was organised by the VDA and the consulting firm Wirtschaftsprüfung & Beratung PKF.

One of the core tasks of tax policy was providing companies with a “reliable and competitive framework for investment decisions,” Bräunig explained. Small and medium-sized industrial companies in particular needed sufficient flexibility in order to remain independent of the finance and banking sector through a high equity ratio. Bräunig underlined, “Nobody wants major competitive disadvantages for German partnerships – in comparison with stock corporations or in international comparison. Tax increases are also contraindicated by the fact that the tax quota in Germany has risen sharply and almost reached the record levels of the years 1965 and 1980. The automotive industry believes that increases in taxes and levies should therefore be clearly rejected.”

He emphasised that this also applied to the projected tightening of the regulations on taxation of company cars, and drew attention to the unequivocal result of a hearing in the Finance Committee of the German Bundestag, which found that the one-per-cent rule was appropriate and had proven its value in practice. The Finance Committee had established that the rule did not represent “a tax privilege.” Greening the taxation on company cars was rejected because it would run contrary to the basic principles of earnings-based taxation: “Company expenditure is still that which is necessary for the operation of the company, and so it includes all the costs of a company car, with tax depreciation,” Bräunig stated.

Despite his full schedule Dr Thomas Schäfer, the Hessian Minister of Finance, still welcomed the participants at the symposium personally. Then Prof.  Frank Balmes of PKF delivered a statement about current developments in vehicle taxation. He welcomed the fact that politicians had released the “tax brake” on electric mobility: new electric vehicles first registered between 18 May 2011 and 31 December 2015 are exempt from motor vehicle tax for ten years, and for new registrations between 2016 and the end of 2020 the exemption applies for five years. To add to this, Balmes said, there was compensation on electric company cars: for new electric vehicles first registered before the end of 2013 the one-per-cent rule was reduced by 500 euro per kWh of battery capacity, up to a maximum of 10,000 euro. It was planned to gradually decrease this compensation over subsequent years, by an annual 50 euro per kWh, with the maximum amount shrinking by 500 euro every year.

Prof. Balmes listed the tax-policy plans of the German political parties CDU/CSU, SPD, the Green Party, FDP and the Left Party which were relevant to the approaching national election, and assessed the possible effects of a wealth tax on family-run companies in the automotive industry. He summarised by saying, “The effect of a wealth tax on family businesses in the automotive industry – which means in particular suppliers – would be disastrous. We would have creeping expropriation through a non-earnings tax that increased capital costs and weakened the equity base. The consequences would be less investment activity and in future lower tax revenue.” He added that one would then expect outflow and relocation of wealth and sources of income. Balmes pointed out that the income tax scale urgently required adjustment for inflation: “If it is not adjusted for inflation, we will have a case of ‘fiscal drag’ pushing more and more taxpayers into a higher tax bracket.”

The different tax-policy positions were then discussed by a panel comprised of Lothar Binding, Member of the Bundestag and financial-policy spokesman of the SPD Parliamentary Group; Dr Thomas Gambke, Member of the Bundestag and SME officer of the Parliamentary Group of the Green Party; Dr Michael Meister, Member of the Bundestag and Deputy Chairman of the CDU/CSU Parliamentary Group; and Dr Volker Wissing, Member of the Bundestag and Deputy Chairman of the FDP Parliamentary Group. Businesses were represented by Dr Hans Maier, Head of the Corporate Department Taxes and Customs Duties at Robert Bosch GmbH and deputy chairman of the VDA’s Taxation Committee. The discussion was chaired by Gerd Faber, Partner at WTS Group AG and Chairman of the VDA’s Taxation Committee.

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