Draft bill regarding VAT in the German postal market: TNT Post demands improvements

TNT Post in principle welcomes the fact that the German Federal Government is revising the VAT regulation in the postal market. This is a necessary step because the current VAT exemption for Deutsche Post AG is contrary to EU law and impedes competition. However, the present draft bill will not encourage competition in the postal market.
Inexact phrasing that is open to various interpretations enables Deutsche Post AG to maintain its VAT exemption. Through this VAT exemption, the German State has foregone tax revenues of up to EUR 500 million per year. There is no substantive reason for the long transitional period up to 1 January 2010.
Although the draft bill is a step in the right direction, it will not encourage fair competition conditions. TNT Post therefore calls upon the legislature to make improvements to the draft bill.
The current VAT exemption for Deutsche Post AG protects half the total volume of mail in its favour and thus distorts competition. The European Commission already opened an infringement procedure against the German State in early 2006. Together with the excessive minimum wage for postal services (a cost increase of over 20 pct) and the lack of price control (Deutsche Post AG discounts of up to 26 pct), the VAT disadvantage suffered by the new postal service providers (a cost disadvantage of 19 pct) prevents fair competition in the postal market.

TNT Post in principle welcomes the fact that the German Federal Government is revising the VAT regulation in the postal market. This is a necessary step because the current VAT exemption for Deutsche Post AG is contrary to EU law and impedes competition. However the present draft bill will not encourage competition in the postal market.
Inexact phrasing that is open to various interpretations enables Deutsche Post AG to maintain its VAT exemption. Through this VAT exemption, the German State has foregone tax revenues of up to EUR 500 million per year. There is no substantive reason for the long transitional period up to 1 January 2010.
Although the draft bill is a step in the right direction, it will not encourage fair competition conditions. TNT Post therefore calls upon the legislature to make improvements to the draft bill.
Mario Frusch, CEO of TNT Post Germany comments: “The best solution would be a uniform system whereby all postal service providers would be required to charge the full VAT rate. Optionally, single consignments sent by private consumers – fewer than 50 items – could continue to be exempt from VAT. The law must not leave any room for interpretation. It needs to be improved. Deutsche Post AG must not be given any scope for circumventing charging VAT on business mail.”
The current VAT exemption for Deutsche Post AG protects half the total volume of mail in its favour and thus distorts competition. The European Commission already opened an infringement procedure against the German State in early 2006. Together with the excessive minimum wage for postal services (a cost increase of over 20 pct) and the lack of price control (Deutsche Post AG discounts of up to 26 pct), the VAT disadvantage suffered by the new postal service providers (a cost disadvantage of 19 pct) prevents fair competition in the postal market.