The biggest news in Germany from the past year was clearly the 12 Points, the plan brought in by the government to reform the tax system. However, the pedestal this sat on at the outset steadily eroded away as these potential changes petered out.
"The ...
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The biggest news in Germany from the past year was clearly the 12 Points, the plan brought in by the government to reform the tax system. However, the pedestal this sat on at the outset steadily eroded away as these potential changes petered out.
"The 12 issues or points are quite a big thing, though there are actually 13!" said one partner.
"They named real, significant changes but there are elections next year now and the announcements are finished. We expect nothing," said another adviser. By summer, things had ground to a halt.
"In February the bill was issued, but by June and July people thought they would abandon the programme and only realise a few points. Now it has been dropped," explained one practitioner, while Freshfields Bruckhaus Deringer's Christian Ruoff looked ahead: "Contrary to original expectations, there will be no 'big bang' reform of German enterprise taxation in the area of group taxation this year. However, this may change in 2013, especially depending on the outcome of the federal elections."
Elsewhere, other trends from the rest of Europe are evident in the tax system: "The authorities are stricter. You don't just get confronted with one auditor now, you get a chief lead auditor and then other specialised auditors with certain independent closing authority concerning their field of expertise with them," said York Zöllkau, head of tax at Ernst & Young.
This has led to more court work. "We see litigation becoming busier. It has been a trend for the last three to five years. The government is in need of more funds," said a partner.
"There are new taxes – this is an increasing sport for the authorities! There is a nuclear fuel tax and a new air traffic tax," said an adviser, of the ways the government is attempting to swell its revenues.
The more intense scrutiny of transfer pricing in Europe is occurring in Germany too. "They have become stricter on TP policies," said Sebastian Benz at Linklaters. "Auditors have become experienced and in fact are being taught in this direction in their internal development programmes, so they have a good ground to stand on."
The tax market is being shaped by internal and external economic pressures both: "With the financial crisis, M&A and PE (private equity) has slowed down, while restructurings have increased significantly," said Ruoff. The energy sector has also seen an increase in activity due to changes in policy, including the unbundling of power companies and the switch to renewable sources such as wind power.
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