Market > Germany > Corporation Tax
The high marginal rate of tax on corporate profits has often been cited as a reason why Germany does not draw more foreign investment. The recently passed tax reform law means that taxes on corporate income will be reduced to 25 per cent by 2001. In addition income tax rates are set to fall drastically over the next five years, at the same time doing away with the complex graded tax tables.
The top rate will fall from 53% in 1998, to 45% by 2005, whilst the bottom rate will drop from 25.9% in 1998 to 15% by 2005. A number of federal and state investment promotion measures also lower capital charges.
It is therefore not surprising that despite comparatively high labour costs and nominal tax rates, economic indicators clearly point to increased inward investment activity in Germany. Conditions that will allow German industry to increase its competitive strength on international markets have improved since the new government took power in 1998.
Moderate collective wage agreements, ready foreign markets, high price stability, low interest rates, a correction of the excessive DM exchange rate of the past years and increased corporate profits have all contributed to substantially improving German industry's competitive standing in foreign markets. Export trade continues to expand - with growth of 4% in 1999.
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