BERLIN (MktNews) - German Chancellor Gerhard Schroeder confirmed Monday the government planned to introduce a 25% withholding tax on interest income and incentives to repatriate funds from foreign tax havens.
Speaking to reporters after the SPD's regular board meeting, Schroeder said: "We want a national directive that allows for a national handling of the taxation of bank savings ... and I consider a 25% rate reasonable." A national savings tax directive should also help those "who have not paid taxes, thus have not been honest to find a way back into legal taxation," Schroeder added.
The government's current plans call for a 25% tax rate on money repatriated until the end of 2003 and for a 35% rate on that repatriated through 2004, Schroeder said, adding that this measure was expected to bring government coffers more than E100 billion. The government proposals rely heavily on the return of expatriated German money -- estimated at over E300 billion -- since the tax will be levied on the whole amount that had been brought abroad.
Meanwhile, Finance Minister Hans Eichel also said the government was not considering further tax hikes after the introduction of the savings tax. Germany's business community and the opposition parties widely welcomed the government's plan on Monday, saying this would be an important step to reform the nation's tax system.
Therefore, Schroeder can be optimistic that the Bundesrat, the opposition-led upper house of parliament, will approve the government's tax plans. Furthermore, Schroeder voiced confidence that the planned initiative would help to end a debate over the introduction of a 1% wealth tax as considered by several SPD-led states.
Several German media outlets reported over the weekend that the federal government planned to introduce a 25% withholding tax rate on bank savings. Currently, savings income above a certain level is taxed at the personal income tax rate, that can be as high as 48.5%. //www.marketnews.com