164. New Tax Legislation: Overview

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Since release of article no. 154, the new German coalition government of Social Democrats and Greens has enacted all of the tax or tax-related legislation announced in November 1998. This legislation is contained in a number of different bills.

The unpopularity of the measures so-far enacted has lent force to a whirlwind of political activity with the goal of enacting additional tax reforms as soon as possible. The situation has been complicated still further by a recent ruling from Germany's highest tax court which creates serious doubt as to the constitutionality of central aspects of the reforms both as already enacted and as originally planned for the future.

However, the new constitutional ruling does not seem likely to derail further tax reform, though it may cause a bit of re-routing. Indeed, the drive for additional tax reform has gathered momentum with the presentation in late April 1999 of a report by a government commission on tax reform options (the Bruehl Recommendations).

A number of new articles are being released which describe the measures so far enacted and provide perspective on those which may follow. An overview of such articles is set forth below as a navigational aid:

This article brings readers up to date on developments relevant for the continuing tax reform debate, including the Bruehl Recommendations and a recent Federal Tax Court ruling.

This article describes in general terms the tax legislation which has been enacted so far (excluding the "ecological" tax reforms and changes in the treatment of low-paying jobs) and analyses the fiscal impact of this legislation.

The important provisions in the new legislation are dealt with individually in this article.

The "Law Taking Initial Steps Towards Ecological Tax Reform" raises excise taxes for certain fuels and enacts a brand new tax on electric current effective 1 April 1999.

German tax law has long contained provisions permitting employers to remit a flat rate wage tax, without paying any social contributions, for employees earning no more than a certain amount (currently DM 630 per month). The fundamental changes in this area are described in article no. 169.

Unlike for instance the United States, Germany has no self-employment tax for the independently employed. Instead of instituting such a tax, as some advocate, the new government has made changes in the existing laws to bring persons who are not "truly" self-employed back under the coverage of its social legislation.

Disclaimer and Copyright

This article treats the subjects covered in condensed form. It is intended to provide a general guide to the subject matter and should not be relied on as a basis for business decisions. Specialist advice must be sought with respect to your individual circumstances. We in particular insist that the tax law and other sources on which the article is based be consulted in the original, whether or not such sources are named in the article. Please note as well that later versions of this article or other articles on related topics may have since appeared on this database or elsewhere and should also be searched for and consulted. While our articles are carefully reviewed, we can accept no responsibility in the event of any inaccuracy or omission. Please note the date of each article and that subsequent related developments are not necessarily reported on in later articles. Any claims nevertheless raised on the basis of this article are subject to German substantive law and, to the extent permissible thereunder, to the exclusive jurisdiction of the courts in Frankfurt am Main, Germany. This article is the intellectual property of KPMG Deutsche Treuhand-Gesellschaft AG (KPMG Germany). Distribution to third persons is prohibited without our express written consent in advance.