The German coalition government's business tax reform plan came under fresh attack on Saturday, with regional leaders threatening to vote against the measure and top companies reportedly also opposing the overhaul.
Several conservative state leaders will oppose the measure in the Bundesrat upper house of parliament unless Finance Minister Peer Steinbrueck drops a proposal to tax financing costs such as interest payments, Spiegel magazine reported.
"We will not agree to the taxation matter as planned by Finance Minister Steinbrueck in the Bundesrat," Gerhard Stratthaus, finance minister of the state of Baden-Wuerttemberg, told Spiegel. Conservative leaders in the states of Bavaria and North Rhine-Westphalia also opposed the proposal to tax interest payments, Spiegel said.
The corporate tax reform is seen as a test of whether Chancellor Angela Merkel's coalition of conservatives and Social Democrats - in power since last November - is strong enough to push through tough reforms.
Steinbrueck, a Social Democrat, has proposed broadening the corporate tax base to include interest payments to help fund a planned reform that would cut the tax rate for listed companies to just below 30 percent from some 39 percent.