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Not Different, but Better (November 10, 1998)

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We will also fundamentally reform business taxation. Taxation of company revenue will be limited to thirty-five percent at most. We are now creating the necessary legal prerequisites. This will provide relief to small and medium-sized businesses, which – let me repeat – will play a key role in creating new jobs.

Ladies and gentlemen, despite what is occasionally claimed, we have also taken the concerns of small and medium-sized businesses into consideration. The loss carryover will remain. A one-year loss carryback will also remain for losses arising in 1999 and 2000, up to a maximum of 2 million DM. The reinvestment of earnings from the disposition of land will continue to be supported pursuant to § 6b of the Income Tax Law.

The special allowance and investment reserves for business start-ups can be taken advantage of without any changes. They will remain for small and medium-sized businesses through 2000.

The tax rate reduction for capital gains will merely be restructured through an accounting distribution of the profit, it will not be eliminated. This will contain the loss allocation models – this needs to be acknowledged – but it will not have any negative effect on the successor enterprise.

As our initial steps show, we will make the tax law more transparent and therefore more efficient. Unnecessary tax subsidies should be eliminated and valuable tax revenue should no longer be wasted on senseless tax-saving models.

Ladies and gentlemen, let me speak briefly about the comprehensive widening of the assessment base, as was announced in the coalition agreement. Interested circles have acted as though our tax reform literally aimed to take the butter off the bread of businesspeople. To that, it must be said that in the past years only very few of them profited from tax relief. The vast majority suffered from tax burdens. Every reasonable tax reform must first stop this trend that you [i.e., the previous government] triggered.

People in this country can recognize the sea change that we have introduced: relief and simplification instead of ever higher taxes and ever declining transparency. I think that anyone who is genuinely interested in substantive issues will willingly accept our invitation to consult in a joint commission on the structural reform of the tax law.

I would like to say one thing to those who have been heaping the sharpest accusations upon us in the last few weeks: wanting low and simple tax rates, like those in the United States, for example, and at the same time wanting to maintain a high number of exemption provisions, as we have had in Germany up to now, simply doesn’t work.

[ . . . ]

Source: Policy Statement by Chancellor Gerhard Schröder at the 3rd Session of the German Bundestag, November 10, 1998, Bulletin (Press and Information Office of the Federal Government), no. 74, November 11, 1998.

Translation: Allison Brown

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