Plans to reduce the tax burden of German businesses have attracted criticism from the Social Democratic Party, which has threatened to oppose the tax reforms introduced by finance minister Peer Steinbruck. The reforms, which aim to lower the average tax burden on companies from 38.7 percent to 29.8 percent and to make up at least some of the loss by closing existing loopholes in tax law, have party members upset because new estimates have been released showing that the total relief to businesses would total €8 billion per year in the first years of the program, rather than the €5 billion in Mr. Steinbruck’s earlier estimates.

Some members of the SPD with seats in the Bundestag have also complained that their constituents have reacted negatively to the reforms, which they see as an unfair benefit to business in the wake of deep cuts in German’s welfare system. Criticism is not limited to politicians and the public, however. Some sectors of the business community have also expressed displeasure with certain aspects of the reform, which would limit the ability of insurance companies, private equity, and highly leveraged businesses from deducting interest payments from their taxable profits.

There were reports on the press on Tuesday that Mr. Steinbruck, a member of the SPD himself, had threatened on Monday to resign if his party forced a renegotiation of the reforms, but aides have denied those reports.

Despite a coalition between the SPD and Prime Minster Angel Merkel’s Christian Democratic Union that has a huge majority in the Bundestag, there have been difficulties in passing Ms. Merkel’s promised reforms due to ideological differences between the two parties. Those difficulties are expected to grow as new elections approach.

Tags: European Economy News //