Germany’s main business lobby today called for the government to give so-called “patent box” tax breaks on profits generated from patented research to encourage innovation in the German economy.

"In Germany, the taxation of research results is almost six times as high as in the Netherlands and three times as high as in Great Britain," Markus Kerber, managing director of the BDI industry association, said in a statement. "Targeted lower taxation of profits from patents - a so-called patent box - makes it considerably more attractive to do research activities in Germany," he said.

Mr Kerber added that lowering this tax would provide more incentive to preserve and increase innovation, research and development in Germany. So-called “patent boxes”, which offer special low interest rates for the income from patents and licences, are currently a popular instrument with which countries poach innovative firms, and therefore lucrative sources of tax revenue, from each other.

Germany has, until now, not granted any “patent box” tax advantages and income from patents and licences here is generally taxed, just like corporate profits, at around 30 per cent. That compares with just 10 per cent in Great Britain. German magazine Der Spiegel reported at the weekend that the finance ministry was considering lowering taxation of income from patents and licences to 10 or 15 per cent in Germany.

German finance minister Wolfgang Schaeuble has repeatedly railed against such competitive practices between countries and has threatened individual national regulations as long as no solution is found on the international level. Last year Schaeuble called for a ban on the "patent box" tax break offered by Britain, Netherlands and some other bloc members which he said resulted in unfair competition for foreign investment.

At a meeting in Cairns, Australia at the end of this week finance ministers from G20 states will talk about "patent boxes" in their discussions about a comprehensive initiative to close tax loopholes.

Reuters