EC Tells Germany To Get On With It

The European Commission is finally running out of patience over the time it’s taking the German government to change its withholding tax laws and has threatened to take it to the European Court of Justice.

In an open note to Berlin, the EC has told the federal government to stop taxing artists and sportsmen’s (and journalists’) incomes at source and allow them to deduct their expenses before settling their tax obligations.

The German government has dragged its heels on the issue to the point that Harald Grams, the Bielefeld-based tax expert who mounted the legal challenge to its methods of collection, said what disappoints him most about his government’s reaction is the fact there hasn’t been one.

The EC was slow to harry Germany despite the fact that Gramms’ 2003 Gerritse case victory in the European Court of Justice had shown German tax laws are in breach of the basic principles of the European treaty.

It was arguably waiting until the European Court of Justice gave a ruling on "the Scorpio case," a similar issue that Grams had brought on behalf of Folkert Koopmans’ Hamburg-based FKP Scorpio regarding withholding tax assessments.

When the ECJ ruled in Gramms’ favour a second time, it seems to have prompted the EC to get back on the Reichstag’s case.

Gramms takes the view that the government delayed because it could and, although it’s made no official move itself, the fact the Bundesfinanzministerium told German promoters to postpone payments of withholding tax until the Scorpio ruling suggests the finance ministry had already figured it was on a loser.

The German government has a statutory two months in which to respond before the Commission has the option of suing it in the European Court of Justice.

Of the 27 EU member states, only the U.K., Holland, Ireland and Denmark don’t have withholding tax laws that conflict with Articles 59 and 60 of the EC Treaty.