German Finance Minister Peer Steinbrueck faced fresh resistance on Saturday to his corporate tax reform plans, an important element of the coalition government's economic reform programme.
Guenther Oettinger, conservative state premier of Baden-Wuerttemberg, and Bavaria's finance minister Erwin Huber both said they opposed an expected broadening of the so-called Gewerbesteuer, a local business tax, under the reform.
"That definitely won't happen with the CSU," Huber told the Passauer Neuen Presse, with reference to his Bavarian conservatives, the sister party of Chancellor Angela Merkel's Christian Democrats (CDU).
Steinbrueck, who said the reform would make Germany a more attractive place to do business, also faced resistance to the reform from within his own party, where a senior figure called for the size of tax cuts to be limited.
"Lasting (tax) relief of eight billion euros is unacceptable from the SPD's viewpoint," Claus Moeller, chairman of the Social Democrats' (SPD) party council, told Focus magazine.
After just over six months in office, Merkel's coalition government of conservatives (CDU/CSU) and centre-left Social Democrats is being closely watched for signs of whether it is strong enough to push through much-needed reforms.
The corporate tax reform, a rise in value added tax (VAT) and reform of the health insurance system are seen as the major tests. The Bundesrat upper house of parliament relieved some of the pressure on Friday by approving the VAT rise.
The fresh resistance to the corporate tax reform came after Steinbrueck said on Friday he was annoyed by increasing infighting inside the grand coalition about important issues like corporate tax reform. Companies complain that along with the high cost of labour, high tax rates are one of the factors that have driven firms away from Germany in recent years. Steinbrueck said he wanted to stimulate the economy with the reform.
"My goal is to have company tax rates that encourage growth," he told the Bild am Sonntag newspaper in an interview to run on Sunday. "On the other hand, we will close tax loopholes."
"The goal is for incorporated companies to have a tax burden of just under 30 percent after the reform," he added. The overall tax rate for companies now stands at some 39 percent. In addition to the Gewerbesteuer, the rate of which varies between local authorities, incoporated businesses pay corporate income tax and a solidarity tax. Smaller partnerships pay income tax of as much as 42 percent, though most pay less.
Simplifying the dizzying web of intertwined federal, state and local taxes has become a holy grail for politicians on all sides but attempts at reform have generally ended in half hearted compromise or despair for whoever attempted the task.
Steinbrueck had originally planned to unveil details of his ambitious corporate tax reform plan this weekend. A committee of senior coalition officials is now expected to examine the plans next weekend.