German Finance Minister Hans Eichel is working as quickly as possible on a more competitive system of corporate tax but reforms could not take effect before 2007, he was quoted as saying on Saturday. Calls for urgent reforms to Germany's corporate tax system intensified this week after Chancellor Gerhard Schroeder announced he was considering short-term measures to boost economic growth.
He said he would discuss his ideas with opposition leaders in talks next Thursday.
"We need a more competitive system of taxation with lower rates and a broader assessment basis," Eichel told German news weekly Focus in an interview.
Companies in Germany on paper pay more than 38 percent taxes on their profits - - the highest rate in Europe. Economists argue lower tax rates would encourage firms to invest more and boost jobs growth, a key political aim as Germany battles record unemployment. Asked whether reforms would be ready by 2006 Eichel said: "We are working on it - as quickly and as carefully as necessary." He added: "If we work rapidly and are well prepared, the reforms could take effect by 2007."
His finance ministry denied a newspaper report that the German government had charged the head of its economic advisory panel to devise corporate tax reforms by May.
In an advance copy of its Sunday edition, Bild am Sonntag said Bert Ruerup had been asked to prepare reforms to take effect this year and which would be at the heart of Schroeder's swathe of growth-boosting measures.
Speculation is rife as to the nature of Schroeder's proposals, with leading economists including Ruerup having warned politicians against pushing through short-term measures, which could hamper longer-term reforms. However there is a wide consensus that corporate tax reforms are necessary.
Bild am Sonntag said the planned reform included lower tax rates and would make it more difficult for firms to shift their liability to taxes on profits abroad.
Meanwhile Germany's Welt am Sonntag newspaper said on Saturday the finance ministry was looking to cut German corporate income tax rates to around 20 percent from a current 25 percent in a move costing five billion euros ($6.72 billion).
Eichel has in the past ruled out any changes to corporate tax before the 2006 general election, despite pressure from Economy Minister Wolfgang Clement, arguing the government could not afford further tax cuts due to its budget situation. But he told Focus Germany's high nominal rates compared with other European states were causing the country problems.
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