German-French tax harmonization should not disadvantage companies

Germany and France are planning a shared corporation tax, including a harmonized basis for assessment and tax rates. The results of a proposal, which is to be developed jointly, should be implemented from 2013. In any case, this is what what decided by German Federal Chancellor Dr. Angela Merkel and the French President Nicolas Sarkozy at their summit meeting in August 2011.

In response to a question during parliament question time, the Federal Government recently clarified the implementation status (Bundestag document no. 17/5158). According to the statement, Germany and France have together been searching for approaches since the end of 2010 as to how, and in which areas the corporate taxation and corporation tax law of the two countries can be compared. Like the summit of August 2011, the search follows the realization that a currency union must also be backed up by economic policy.

The goal is that the EU would be better equipped to compete. The EU perspective has also been evident in a joint letter from Merkel and Sarkozy to the President of the European Council, Herman Van Rompury, that the EU Member States should further promote the coordination of tax policy.

The sought-after German-French convergence regarding corporation tax should, according to the Bundestag document, facilitate the cross-boarder operations of companies. To put it clearly, the standardized rules should reduce the companies' tax costs.

A report, which a German-French project group has been working on since the end of 2010 and is set to be released in late autumn 2011, will show in detail exactly which problems will arise. The fact that a harmonization, when faced with differences in the basis for assessment and the tax levels, will not be simple, has already been made clear in the statement by Merkel at the press conference after the summit, which was cited during the question time. According to this statement, in spite of the existing differences, taxation should not worsen as a result of a comparison of corporation tax - and this applies for both German and French companies.

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