Germany’s Corporate Tax Reform Needs Rectification

On January 1, 2008 Germany enacted a comprehensive company tax reform. Its purpose is to increase the country’s attractiveness for business investments by lowering the overall tax burden for corporations below 30 percent.

However, parts of the reform miss this target. Unincorporated companies actually face a significantly higher tax burden than before. This adverse effect is additionally exacerbated by the simultaneous introduction of the withholding tax on household capital income which counteracts the aim to strengthen equity financing of companies.