German government proposals to impose capital gains tax on equity speculation by investment managers has been dropped from an announcement by the Bundestag, following vigorous lobbying by the industry.
The proposals, which would have meant that German asset managers could no longer buy and sell shares tax free, had been designed to net around DM50m (E25.5m) for the government, in a bid to satiate increasing budget defecit in the country.
However, Wolfgang Rabb, head of the old age provision department at the BVI (Bundersverband Deutscher Investment-Gesellschaft) German funds association, says the draft legislation could have been catastrophic, both for fund managers and private investors. “Basically, the idea was to tax fund managers on equity trades no matter how long they had been holding the shares, with the aim of raising DM50m for the treasury.
“In reality though, the government income would have been peanuts in comparison to the budget defecit it is attempting to plug; but for investment managers and individual in-vestors it would have spelt disaster.
“Theoretically if a single stock was valued at E100 on Jan 1, then rose to E140 and was bought by an individual, but then fell again to E130 - at which time the manager decided it was time to sell through fear of losing any more, then the individual would not only have lost 10% of their original investment - but under these proposals also been stumped with the capital gains on the 30% made since the original valuation.”
However, the government an-nouncement did have a sting in its tail for retirement savings. Previously, single and married workers enjoyed tax-free saving levels of DM6,000 and DM12,000 per annum respectively. These have now been halved, with similar budget boosts in mind by the German authorities.
Rabb adds: “This is not the way to encourage individual pension provision, and we are slightly mystified by the confusing messages being sent out by the government on retirement provision - it can only be bad news for the future, and we certainly oppose these new savings limits.” Hugh Wheelan