GERMANY- German investors could find themselves facing a flat rate 15% capital gains tax on domestic equity and real estate investments. German finance minister Hans Eichel proposed the rate during coalition talks between the Social Democrats and the Green Party on Sunday evening.

Declining growth, revenue shortfalls and a growing budget deficit in Germany have encouraged Chancellor Gerhard Schroeder’s newly re-elected government to introduce a series of tax increases, which have raised concerns among members of the fund industry, and have threatened the new third pillar system.

Fund management companies are concerned that a capital gains tax will destroy the equity culture that has been gradually building up in Germany, as well as preventing the private pensions market from growing. The consensus is that a tax on savings will discourage individuals from putting money aside for retirement.

However, the rate of 15% comes as some relief to investors. They had been bracing themselves for a capital gains tax rate of around the 20%-29% mark that had been mooted in October.

The tax is likely to come into effect February 21 next year, when parliament is to take a final vote on the overall tax proposals.