Mon, May 12, 2003 - Page 10 News List

Infineon wants to abandon Germany's burdensome taxes

AFP , FRANKFURT

Infineon chairman Ulrich Schumacher clearly means business in his battle against what he perceives to be Germany's excessively high taxes.

His threat to relocate the headquarters of Europe's second-biggest maker of semiconductors outside Germany is not the empty saber-rattling many observers had first thought it might be.

Infineon has already moved its book-keeping activities to Portugal and recently announced it would also transfer its auto-electronics business to Austria.

Schumacher put the proposal to relocate Infineon's headquarters to his company's supervisory board last week. And while no final decision is imminent, the chairman told the recent interim earnings news conference that concrete proposals for a relocation could well be on the table by the end of the year.

If Infineon does decide to turn its back on Germany, the departure of one of the country's top 30 companies would not only be an embarrassing blow to the government under Chancellor Gerhard Schroeder, it would also dangerously undermine Germany's international reputation and standing as an industrial and manufacturing site.

And that could spark a wave of other corporate defections.

Another IT company, the electronic components maker Epcos, for example, has also publicly stated it is considering moving abroad. Even family-run groups such as the food empire Oetker have hinted they might be thinking about emigrating to sunnier climes.

The companies make no secret about who or what they think is to blame: the relatively high level of taxes in Germany and the government's frequent and confusing U-turns in economic and fiscal policy that make it difficult for firms to plan long-term.

Schumacher reckons Infineon could save hundreds of millions of dollars each year in taxes, money that could be better used for investment in "new technologies and infrastructure."

And Epcos chief Gerhard Pegam said that Germany had "serious problems as an industrial site" given the inability of politicians to push through the necessary structural reforms. Indeed, whoever was not considering moving abroad "could be out of the picture tomorrow," Pegam warned.

A board member of the German BDI industry federation, Ludolf von Wartenberg, said in a newspaper interview last week that he hoped such words would cause German politicians to sit up and listen.

"Perhaps it'll serve as a wake-up call to the footdraggers on reform," he told the business daily Handelsblatt.

The government's second term in office had so far been marred by an unrelenting cacophony in fiscal policy matters and an inability to make any headway on reforms.

Schroeder is currently facing fierce resistance to his reform plans, not only from trade unions, but even from within his own party.

While Infineon says it looking at a number of different possible sites, Schumacher appears to favour a move to Switzerland, where companies pay taxes of eight to 10 percent on profits, compared with 30 percent in Britain, 35 percent in the Netherlands and 40 percent in Germany.

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