GERMANY – Next year could see 100 billion euros of offshore investments by German citizens return to the country of domicile, if plans announced by Chancellor Schroeder materialise.
In an attempt to encourage German citizens to repatriate undeclared funds held abroad, which are estimated at 300 billion euros, Schroeder has announced plans for an “amnesty” whereby German citizens with investments abroad will be able to transfer their money back into the country next year, avoiding prosecution for tax evasion
Schroeder said the measure would probably see Germans move more than 100 billion euros back into the country next year. A 25% penalty will be payable on the repatriated funds, rising to 35% for the last six months of the amnesty, which ends June 2004. Monies received by the government would be used to finance Germany’s flailing public services.
In addition to the amnesty, Schroeder also announced cuts to savings tax, to encourage Germans to keep their money in the country. A flat 25% savings tax will replace the current tax which is between 19.9% and 48.5%, depending on earnings.
The measures have for the most part been well-received by opposition parties, banks and industry participants as they will simplify Germany’s tax system and should bring in revenue. Labour unions, however, have argued that the tax is biased towards the wealthy.
The amnesty and tax cut are expected to take effect on January 1 2003.