Deutsche Post hangs on to tax breaks
The German government yesterday reiterated that it was justified in exempting Deutsche Post, the postal group, from raising sales taxes on certain core services.
Deutsche Post’s tax payments have become a major source of irritation for investors since Germany’s federal audit office in January reproached the government for granting Deutsche Post an unfair competitive advantage by exempting it from sales tax.
The office claimed that the tax exemption gave Deutsche Post an unfair competitive advantage of about Euros 450m (Dollars 392m) annually.
Investors fear that Deutsche Post may have to pay back the taxes after all at some stage in the future and that this could put pressure on its balance sheet.
In late-afternoon trading, Deutsche Post shares traded up 1.3 per cent at Euros 14.60. The shares have lost 7.5 per cent since late January.
The tax discussion once again flared up over the weekend after Germany’s mass tabloid Bild Zeitung said the state of North-Rhine Westphalia had called on Deutsche Post to pay back sales taxes for the years 1998 and 1999.
Another newspaper said the postal carrier had charged clients with taxes they did not owe.
German companies must pay about 40 per cent of sales taxes to the federal government, with the rest going to state governments. Deutsche Post is headquartered in North-Rhine Westphalia.
“We refer to a ministerial guideline from early 2000 in which finance minister (Hans Eichel) clarified that Deutsche Post’s core public services are exempt from sales taxes,” a government spokesman said.
Core services include delivering letters up to 2,000 grammes and packages up to 20 kilogrammes.
Edgar Ernst, Deutsche Post chief financial officer, said that Deutsche Post had become a victim of political interests in the run-up to Germany’s federal elections, which are due in September.
A Deutsche Post spokesman said: “The whole discussion is getting out of hand – it has reached a point were it has become hard for us to tolerate.”
He added that the post office’s tax exemption on certain letters and packages would last at least until 2007 when its monopoly runs out. Deutsche Post must pay sales tax on commercial packages.
Page 29; Edition London Ed2; Section COMPANIES & FINANCE EUROPE
Copyright 2002: Financial Times Group
