Britain’s Prime Minister Gordon Brown may take some comfort from the fact that he is not alone in receiving calls to review and reshape the domestic regulatory and tax environment of private equity. According to an agreement between the German coalition government parties, private equity investment companies will be granted tax benefits amounting to E500m (£336m) per annum in Germany as of 2008. Similar measures have been discussed among experts for a considerable time in Germany, in order to stimulate the market.
So far, however, the German tax administration has been reluctant to accept a reform proposal fearing that losses of tax revenue would arise. Now the German federal ministry of finance has decided to publish a first draft of the so-called Venture Capital Investment Act (Wagniskapitalbeteiligungsgesetz) in due course. The planned Act is not intended to apply to all private equity investment companies, however, but will target companies for investments into young, medium-sized entities, so-called venture capital investment companies (Wagnisbeteiligungsgesellschaften) only.
