Deutsche Post VAT privileges cut
German Chancellor Angela Merkel’s Cabinet agreed to reduce a tax break granted to Deutsche Post AG while extending the benefit to the mail carriers’ competitors.
Cabinet members meeting in Berlin agreed that from 2010 Deutsche Post will lose an exemption from charging value-added tax on some services such as bulk business mail. At the same time, the tax privileges given to Deutsche Post will be extended to competitors that match the former monopoly in providing universal services.
The step reflects Germany’s aim to “stay abreast of liberalization in the postal market,” the government said in a statement, adding that the plan meets a European Union demand for changes in value-added tax exemptions.
The measures, if approved by parliament, will mean Deutsche Post facing competitors who enjoy VAT privileges at the same time as banks and mail-order companies eat into its core business activities. The Bonn-based company has long fought against an amendment of its tax privilege, citing the costs of fulfilling its charter to provide a universal post service to Europe’s most populous nation.
German Chancellor Angela Merkel’s Cabinet agreed to reduce a tax break granted to Deutsche Post AG while extending the benefit to the mail carriers’ competitors.
Cabinet members meeting in Berlin today agreed that from 2010 Deutsche Post, Europe’s largest mail company, will lose an exemption from charging value-added tax on some services such as bulk business mail. At the same time, the tax privileges given to Deutsche Post will be extended to competitors that match the former monopoly in providing universal services.
The step reflects Germany’s aim to “stay abreast of liberalization in the postal market,” the government said in a statement, adding that the plan meets a European Union demand for changes in value-added tax exemptions.
The measures, if approved by parliament, will mean Deutsche Post facing competitors who enjoy VAT privileges at the same time as banks and mail-order companies eat into its core business activities. The Bonn-based company has long fought against an amendment of its tax privilege, citing the costs of fulfilling its charter to provide a universal post service to Europe’s most populous nation.
“Competition will be stepped up after this measure is implemented,” Dirk Klasen, a Deutsche Post spokesman, said today in an interview. “We have no illusions about that. Yet the crux of it is losing VAT exemption on certain products.” Klasen declined to elaborate.
`Long Transition Period’
Mail carrier TNT Post welcomed the Cabinet decision “in principle,” though it said that there is “no substantive reason for the long transition period” to Jan. 1, 2010.
“The best solution would be a uniform system whereby all postal service providers would be required to charge the full VAT rate,” Mario Frusch, chief executive officer of TNT Post Germany, said in a statement issued from Amsterdam.
The government last year fulfilled a pledge to scrap Deutsche Post’s exclusive license to transport mail weighing up to 50 grams (1.5 ounces), a step it said may help the company to expand as pressure mounts on the 27 EU members to open their postal markets to competition.
Germany may have acted prematurely in amending VAT on postal services, said Klasen. The European Court of Justice is expected in coming months to set EU-wide rules on applying VAT to postal services that may influence Germany’s unilateral policy decision, he said.
