German Economics and Technology Minister Philipp Rösler was presented with a ‘Berlin startup manifesto‘ on Tuesday aimed at persuading the federal government to drop tax proposals set to hit innovative young companies hard.
The minister, who is chairman of the business-friendly Free Democratic Party, the junior partner in Germany’s ruling coalition, met startups and business angels during his visit to betahaus. It is hoped that the manifesto can help reverse the recommendation of the Bundesrat to tax portfolios of small shareholdings held by domestic investors. Such investments constitute a vital source of funding for startups.
Some 1,500 founders and investors have signed the manifesto, drawn up by German-language tech blog Gründerszene, since the Bundesrat – the body that represents Germany’s 16 states at federal level – made its decision in July.
Minister Rösler said: “I share the concerns of German entrepreneurs. If this taxation of Streubesitzbeteiligungen [multiple small shareholdings of less than 10 percent] recommended by the Bundesrat were implemented, it would have an adverse effect on the financing of companies. The taxation of Streubesitzbeteiligungen would complicate the founding of startups and also harm innovation in Germany. It should not result in an unjustified burden on young companies and founders on getting access to capital. We need in Germany an entrepreneurial spirit and innovative entrepreneurship for new momentum in growth and employment.”
He called for further discussion to examine and evaluate the potential impact of the proposals on companies.
The co-initiator of the startup manifesto and business editor at Gründerszene, Alexander Hoffman, said: “The digital economy is one of Germany’s sunrise industries. The local startup and Internet scene is booming. This boom is threatened by the recommendation of the Bundesrat on the Annual Tax Act 2013.”
The European Court of Justice (ECJ) ruled in 2011 that treating foreign and domestic corporations differently violates the principle of the free movement of capital. Currently, dividends from foreign corporations are not exempt, and so the ECJ considers the German regulations to be unacceptable.
It is against this background that German lawmakers have therefore had to introduce the same taxation rules for German and foreign companies.
The Bundesrat’s proposals provide for the introduction of a tax liability for dividend payments to German corporations in free float equity – i.e. for investments of less than ten percent.