German businesses criticise changes to investment fund taxation
German business groups have hit out at Berlin’s plan to reform how it taxes investment funds, warning on Thursday that the proposed changes would hurt pension provisions and reduce the attractiveness of Europe’s largest economy as a place to invest.
The finance ministry announced plans in July to reform the taxation of investments, considered vulnerable to aggressive tax avoidance strategies because of its complexity. It wants to close legal loopholes, bring the German law into line with EU legislation and reduce the administrative burden.
A group of eight business associations representing sectors ranging from private banking, insurance and trade to industry and employers said the reform would ultimately hurt savers.
“The finance ministry’s draft for the investment tax act would lead to an additional tax burden, especially for people saving for their retirement and small savers and it would also permanently damage Germany as an investment location,” the lobby groups said in a joint statement.
Under the proposals, a 15 percent tax would be charged on dividends and real estate earnings in advance at the fund level — a point that drew strong criticism from the industry groups.
“That would mean that funds have less money to reinvest and to hand out in dividends to investors,” they complained.
Until now, investors have been taxed themselves rather than funds. The first 801 euros ($890) small savers put aside per year had been exempt from tax.
In response, the finance ministry said a report had found that the reform would have only a very limited impact on pension provisions and Germany as a financial centre. It said pension schemes hardly invested in funds open to the general public. ($1 = 0.8999 euros) (Reporting by Matthias Sobolewski; Writing by Michelle Martin; Editing by Keith Weir)