Germany's FDP Eyes Saver Tax Relief

by Ulrika Lomas, Tax-News.com, Brussels

Wednesday, February 08, 2012

Germany’s ruling Free Democratic Party (FDP) has recently put forward the idea of raising the savers' tax-free allowance to compensate for a tax imposed on financial transactions.

Insisting that the government should not endeavour to curb speculation at the expense of small savers, the FDP’s financial spokesman Volker Wissing argued that the introduction of a stock market tax should be accompanied by measures providing tax relief for savers.

Wissing suggested that this could be achieved for example by increasing the savers tax-free allowance, although he did not specify by how much the tax allowance, currently EUR801 (USD1,047) for individuals and EUR1,602 for married couples, should rise.

Unveiled back in September last year, the European Commission’s proposal for a so-called “Tobin tax” aims to impose throughout the European Union (EU) from 2014 a 0.1% tax on shares and on bond transactions and a 0.01% levy on derivative transactions, to yield around EUR55bn. Such a tax is, however, vehemently opposed by the UK.

In order to gain the backing of the British government, German Economy Minister and leader of the ruling Free Democratic Party Philipp Rösler put forward the idea back in January of introducing an EU stock market sales tax, based on the existing UK model, as an alternative to the controversial financial transactions tax, currently dividing opinion within the coalition, and indeed within Europe.

Underlining the need for the financial sector to contribute to the cost of the crisis, and determined to gain support for any plans from the British government, Rösler suggested that the UK and Europe examine the idea of a stock market tax, as currently imposed by London.

In the UK, a Stamp Duty Reserve Tax (SDRT) is currently imposed on paperless (electronic) share transactions at a flat rate of 0.5%. In 2006, the UK government generated additional income from the tax of around GBP3.8bn.

Defending his proposal, the FDP leader stressed that if the UK is not prepared to consider the idea of a European financial transactions tax, then it makes sense to discuss an alternative. It is in Germany’s interests, to have the UK on board with any plans, Rösler insisted, warning that a financial transactions tax introduced at eurozone level would merely lead to competitive disadvantages for Frankfurt, and result in an increased burden on customers.

Prepared to proceed unilaterally with the tax, French President Nicolas Sarkozy recently unveiled details of Paris’s proposed tax model, akin to the British stock market tax. Commenting on the proposal, parliamentary secretary of Germany’s Christian Democratic Union (CDU) party Peter Altmaier explained that the French model could serve as a bridge to reach a solution at EU level.