German Deutsche Post threatens higher postage prices
Deutsche Post, the German national postal services provider, has said that taking away its VAT privilege on letters will lead to higher postage prices. Alois Rhiel and Walter Hirche, the financial ministers for the federal states of Hessen and Lower Saxony, have announced that they would like to see the sales tax exemption of Deutsche Post cancelled as quickly as possible. Deutsche Post is set to lose its monopoly in 2007.
The postal service provider has responded by saying this would mean higher prices for customers, particularly private customers, who are not eligible to claim sales tax back. Mr Rhiel said that there was no reason why Deutsche Post should be awarded privileges over its tax-paying rivals. He also doubted that Deutsche Post could raise postage prices in the long term as that would send more customers to the new postal companies. The finance ministry in Hessen believes the sales tax exemption gives Deutsche Post an advantage of between 300m euros and 400m euros per year.
Deutsche Post falls; ministers demand stop to privileged tax position
AFX International ProFeed 06-10-2005
Shares in Deutsche Post AG fell to the bottom of the DAX in early trade after the secretaries for trade and industry in the states of Hesse and Niedersachsen said they wanted to abolish the company’s value-added tax breaks, dealers said.
At 10.12 am, shares in Deutsche Post were 0.13 eur or 0.66 pct lower at 19.47, while the DAX 30 index was at 4,594.05, up 31.30 points or 0.69 pct.
Hesse’s trade minister Alois Rhiel (CDU) and his colleague from Niedersachsen Walter Hirche (FDP) said that Deutsche Post’s value-added tax breaks could not be justified.
Deutsche Post does not pay value-added tax on letters it delivers, and the two ministers added that the company gains a triple-digit mln eur sum every year from the tax breaks.
Rhiel has previously said that Deutsche Post’s monopoly and its privileged tax position mean that private companies have little chance to compete.
