Friday, March 16, 2007

Germany Lowers coroprate tax rates

This isn’t local, but for my macro students it would be useful. Chapter 10 is on economic growth and the third assignment deals with the issue.

Germany is lowering its corporate tax rate.

The plan would reduce companies' total tax burden to a little under 30 percent from the current 38.65 percent, a move aimed both at improving German firms' competitiveness and ensuring that they pay their taxes at home.

The current rate in Germany, Europe's biggest economy, is the highest in the 27-nation European Union, Finance Minister Peer Steinbrueck said.

The reform plan is aimed at "making Germany a more attractive site in terms of taxation, encouraging investment, and on the other hand combating an erosion of the tax base," Steinbrueck told reporters after the Cabinet approval.

An analysis at Stratfor looks at what has gotten in the way of Germany's economic growth in the past.

Four items have limited Germany's potential in years past...

Third, Germany sports massively high corporate taxes -- the highest tax rates in the European Union. Such rates have encouraged companies to shuffle their earnings abroad and discouraged long-term investments in the German economy...

The fourth and final item is one the government is only beginning to tackle: Germany's inflexible labor markets. Two generations of socialist protections have made German workers among the most expensive and least competitive...

Useful stuff.

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