German firms avoid taxes

German businesses avoided paying corporate taxes to the tune of 92 billion euros ($118 billion) in 2008 - the year from which latest figures were available, the German Institute for Economic Research (DIW) calculated in a study.

Germany's daily newspaper "Die Welt" released parts of the study on Tuesday, reporting that the figure marked the difference between companies' net profits and their earnings used for taxation.

"Should our estimates turn out to be correct this would mean German companies had paid only an average of 21 percent tax on their profits between 2001 and 2008, which is considerably less than tax laws demand," the newspaper quoted DIW tax expert Stefan Bach as saying.

According to the DIW study, the corporate taxation gap since 2000 was more than 90 billion euros every year, with a peak of 120 billion euros reached in 2007. Admitting that the figure might be subject to minor calculation errors, Stefan Bach, however, said it was clear that an ongoing gap between net profits and companies' taxable income did indeed exist.

The DIW attributed the gap primarily to retained earnings as a result of prospective losses carried over into the following year - a tax-saving possibility provided by German tax laws. In the meantime, the combined annual carry-over had climbed to a total of 568 billion euros, the DIW said.

"This [figure] clearly points to tax avoidance strategies, or even covert tax breaks, allowing companies to systematically reduce their taxable income," DIW's Stefan Bach told "Die Welt" newspaper.

The institute also found that to a lesser extent, German companies were transferring profits to offshore tax havens - a strategy for which US tech giants Apple and Google were recently criticized.

Corporate tax avoidance strategies are in the focus of a joint working group recently set up by the German tax authorities. The group is charged with identifying national corporate taxation loopholes and developing legislative measures to close them.

uhe/pfd (dpa, Reuters)