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Daimler fuels tax dissent
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March 15, 1999: 10:36 a.m. ET
Auto giant pressures Schröder to reverse corporate tax plans
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LONDON (CNNfn) - DaimlerChrysler kept up the pressure on German chancellor Gerhard Schröder Monday with a thinly-veiled threat to shift operations overseas if the government presses ahead with its tax reform plan.
DaimlerChrysler's criticism echoed comments from a raft of German corporate heavyweights over the past few weeks, including utilities giant RWE (FRWE) and insurer Allianz (FALV). They are protesting against the plan which cuts personal taxes but includes sharp increases in Germany's corporate burden, already among the highest in Europe.
"It could mean companies seeking to move their corporate headquarters out of Germany," Manfred Gentz, DaimlerChrysler's chief financial officer told Reuters, at a news conference in the company's head office in Stuttgart.
The latest broadside against the tax plan championed by former finance minister Oskar Lafontaine suggests German industrialists believe they can push Schröder into watering down the proposals, due to go before the upper house of the German parliament later this month.
Analysts believe it is too late to change the tax plans without disrupting the government's entire legislative program. However, it is likely to introduce a series of measures in the autumn to make the measures more palatable to business.
Gentz's remarks were the latest in a series of attacks by German business on a tax reform package drafted by Lafontaine. It has already been passed by the lower house of parliament and is due to finally to be approved by the upper house on Friday.
Lafontaine shed a little light on last week's shock resignation at the weekend, amid rumors of lingering rifts in Schröder's cabinet. Lafontaine steered clear of directly criticizing Schröder but hinted at "a lack of teamwork" in the coalition government.
Werner Müller, the economics minister who will take the finance brief ahead of Hans Eichel's appointment next month, has already moved to try and defuse the corporate backlash against the tax plans. Müller echoed Schröder's pro-business approach by bringing forward plans to cap corporate rates at 35 percent with the current 60 percent level.
However, Schröder has insisted there can be no re-working of the tax package, which aims to stimulate consumer demand and cut unemployment.
-- from staff and wire reports
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