014. German Tax Reform Act of 1996

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On 31 March 1995 the German Government published its Draft 1996 Tax Reform Act. A brief description follows of the intended changes in the taxation of businesses. Since some of these, especially regarding the trade tax, are very controversial and may never in fact be enacted into law, it is in our opinion premature to base tax planning decisions on the draft legislation.

1. Abolition of the trade tax on capital from 1 January 1996 on (effective for all fiscal years commencing 1 January 1996 and later)

2. Reduction of the trade tax on earnings (e.g., reduction of the basic rate by 10%, which would reduce the tax burden from a range of approx. 13% to 20% to a range of approx. 11.7 to 18%)