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Focus on Germany
OCTOBER 2013
Tackling the complex German tax framework
Exclusive interview – CEO of German Association of Tax Advisers
As part of Lawyer Monthly’s special focus on the German business environment, here we speak to Prof. Axel Pestke, CEO of the German Association of Tax Advisers (DStV), about the German tax framework and what makes it so attractive for businesses at the moment.
Please give me a little information about dStv and your role as cEo – what does your typical day include?
The DStV is the umbrella organization of the 15 regional Associations of Tax Advisers in Germany and represents the interest of tax advisers on national and international level. To this end it mainly campaigns for good operating conditions. Reasonable and compatible taxation as well as feasible accounting rules for the protection of small and medium enterprises are also high on the association’s agenda.
These goals are being realized by the priceless work of the numerous volunteers that are supported by the head office and its 21 employees. My main responsibility is the management of the office and the coordination of various projects. Supporting the president of the DStV and the committees as well as the communication with member organizations are of particular importance. Meetings in Berlin with people associated with the DStV as well as with external persons thus constitute an important part of my day-to-day business.
In order to develop and implement strategies in the mentioned fields I also attend national and international meetings and conferences.
Is the German tax framework attractive for businesses right now? How has it changed over the last ten years?
With the reduction of the corporate tax rate, which was originally 40% until 2000 to 25% in a first step and then to 15% in 2008, Germany transformed itself from a high-tax country to a country with a relatively moderate corporate tax rate in international comparison. This is just one of many examples of how the tax framework for corporations in the German business location has
improved over the last 10 years. The applicable tax system is in general business friendly and stimulates investment activity and economic growth.
In the light of the current positive development in German tax revenues the tax law should be nevertheless systemized in a more positive way and generate investment incentives, especially for the “German Mittelstand” as the supporting pillar of the German economy. To this effect the Deutscher Steuerberaterverband e.V. (DStV) sees needs for reforms for instance in the field of business tax. The broadening of the tax basis with the German corporate tax reform act 2008 led to a noticeable rise of the tax burden for small and medium enterprises. At that time the non deductibility of costs (for example 3/4 of the rent and leasing costs of property) was widened considerably. DStV suggests the elimination of these income increases that are not covered by the companies’ production.
Investment incentives were also reduced by the abolishment of the possibility of declining depreciation in 2008.
Since it actually reflects the real consumption of value this procedure should be readopted. This also complies with the constitutionally demanded ability-to-pay principle. After all, the threshold for the possibility of immediate write-off of low-value assets has remained unchanged at a value of EUR 410 since the 1960s. This tool would especially give small and medium enterprises a liquidity advantage if raised to a timely value of EUR 1,000.
What are the key challenges your members are facing within taxation at the moment?
The German tax system is very complex. Circuitous communication and high costs for staff and computing make working burdensome for tax
advisers as well as for the fiscal administration. The challenge the profession is currently facing is mostly due to increasing digitalization. Two closely interwoven projects constitute the focus point of interest which shall facilitate daily business and raise efficiency: the successful implementation of “prefilled tax declarations” and the “power of attorney data bank”.
Third persons, such as employers and health insurance companies, already digitally transmit data of the taxpayers to the administration. Data approved by the employer such as payroll tax, health- and long term care insurance-premiums as well as information about pension payments, is supposed to be integrated automatically in the tax declaration in the future. Since a faultless transmission of the data cannot be guaranteed in every case, the tax payer or his tax adviser as proxy need to be granted the ability to access and control the data-pools of the fiscal authority. The required authorisation for this purpose shall be ensured through the so called “power of attorney data bank”. This will comprise all authorizations in connection with tax cases. The fiscal authority will thus be able to verify whether the tax adviser is authorized by the client and if the authorization covers his action. In return the tax adviser may access the data pools. A first pilot phase has been successfully completed. Altogether the implementation of these two projects offer the opportunity to bring the electronic communication
between the fiscal
administration, tax advisers and tax payers one crucial step forward.
Another part of the E-Government initiative is the so called “E-balance sheet”. This ruling affects financial years starting after December 31st 2011, so the implementation of electronic transfer of balance sheet and P&L-statement has been in full swing since the beginning of this year. Currently, first experiences and conclusions gained so far