Summary
Germany
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Extract
248. 2001 Business Tax Legislation.
Thomas Sauter, KPMG Frankfurt
For editorial cut-off date, disclaimer, and notice of copyright see end of this article. 1. Legislative history and general purpose The German government introduced the Act for the Further Development of Business Tax Law (Gesetz zur Fortentwicklung des Unternehmenssteuerrechts) in the Federal Parliament (Bundestag) in August 2001. Following revisions in early November 2001 by the Parliamentary Finance Committee, the bill encountered the expected opposition in the Federal Council (Bundesrat). A compromise version drafted by a conference committee was ratified by both Parliament and the Federal Council in mid-December. The legislation was signed and promulgated as the law of 20 December 2001.1 The Business Tax Development Act arises out of recommendations contained in a report presented to the German parliament by the Federal Ministry of Finance on 18 April 2001. Broadly speaking, the objective is to adjust German tax law in light of the increasing internationalisation of the German economy and to improve the tax treatment of business reorganisations, particularly reorganisations by small and medium sized businesses. Other measures are intended to block undesirable tax schemes and to address technical problems or question marks arising from recent prior legislation. This article discusses the major provisions of the new law and highlights the principal changes made to the bill during the legislative process. The summary is necessarily selective. 2. Principle changes during the legislative process 2.1 Political qui bono While the German constitution divides political power between the federal government and the German States (Lander), it generally does not permit the States to levy taxes. The proceeds of taxation are apportioned between the federal government and the various State governments in accordance with detailed constitutional and statutory rules that differ depending on the tax involved. The proceeds of certain taxes, such as the value-added tax, are in principle reserved to the federal government, while the proceeds of other taxes are payable to state government ...See the full content of this document
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