Fiscal measures in German coalition agreement

On 7 February 2018, the German parties CDU, CSU and the SPD formed a coalition agreement. Although there is nothing fundamentally new within the fiscal paragraphs included in the agreement, the agreement does display a broad vision of Germany’s future tax policy, and more importantly, the EU’s future tax policy.

The new German government’s tax ambitions are the following:

• A strong focus on reducing tax competition in the EU by suggesting a collaboration with France on a common consolidated tax base (“CCTB”) and minimum tax rates. France, which has a relatively high corporate tax rate, is known for pushing the policy debate on achieving a harmonized EU corporation tax setting. The new government has the view that progress on EU’s tax system is even more urgently needed in the wake of the recent passing of the major US tax reform.
• More measures to prevent tax avoidance and money laundry on an international and EU level.
• Measures to design a fair tax system in relation to the digital economy, in particular in light of the tax structures of tech giants Google, Apple, Facebook and Amazon.
• Introduction of a substantial financial transaction tax, as proposed by the European Commission. This should effectively result in a specific tax on financial institutions which should contribute to a more stable financial sector.
• In terms of its domestic tax policy, the new government announced it will introduce new tax measures to support R&D, remove the so-called “Abgeltungssteuer” on interest income, implement the various Anti-Avoidance Directives and put an end to the common practice where structures are set up to avoid paying German Real Estate Transfer Tax (“RETT”) on share deals (as no RETT is due if at least 5% of the shares remain with the shareholder).