Germany Debates Tax Breaks for Fat Cats
March 2, 2005
A controversy is gathering pace in Germany over proposals put forward by the regional state government of Hesse to offer tax breaks to high-paid corporate executives, primarily in the banking sector, at a time when unemployment is at postwar highs.
The Bundesrat, or upper house of German parliament, on Thursday is to examine proposals drawn up by Hesse's conservative state premier, Roland Koch, to cut the tax rate for super-rich executives to 35 percent from 42 percent for a period of three years.
Beneficiaries of the tax breaks would be corporate executives grossing more than €77,000 ($101,000) per year or €151,000 for married bosses. The aim would be to attract foreign managers and top employees to Hesse and its financial centre, Frankfurt.
Bad timing
The timing of Koch's initiative could not be worse. This week, jobless data showed that the number of people out of work in the eurozone's biggest economy stands at a postwar high of 5.216 million, or 12.6 percent of the workforce.
The draft proposals have been dubbed the "Ackermann Law" after Josef Ackermann, the head of Germany's biggest bank Deutsche Bank and the best-paid corporate chief in the country.
Ackermann was also one of the fat cats involved in the high profile Mannesmann trial in 2004 along with former Mannesmann chairman Klaus Esser, Mannesmann's former supervisory board chief Joachim Funk, the former head of the powerful IG Metall trade union, Klaus Zwickel, and two others.
They were accused of approving 111.5 million deutsche marks ($71 million) in bonuses to management board members during the multi-billion-euro takeover of Mannesmann by British mobile phone giant Vodafone in 2000. Esser alone pocketed more than €15 million.
All of those involved were cleared of any wrongdoing but the case raised serious questions about the virtual untouchable status of Germany's top executives and the rules governing their money.
The tax break proposals have run into widespread resistance. German Finance Minister Hans Eichel said: "There will be no tax breaks for the super rich with this government." Even the liberal FDP party was critical. "New tax exemptions will neither attract top managers nor create new jobs," said the FDP's finance expert Carl-Ludwig Thiele.