German group opposes plan to close tax loophole for foreign firms

BERLIN (Reuters) - Germany's BDI industry group on Tuesday said it opposes a government plan to close tax loopholes used by foreign companies operating in Germany, arguing that such a unilateral move would send a negative signal to potential investors.

Chancellor Angela Merkel's cabinet is expected to approve draft legislation on Wednesday aimed at tightening rules that allow firms to transfer patents, licences, and market rights to other countries that either apply low taxes or none at all. The measure must still be approved by parliament.

Officials say the measure could generate 30 million euros in additional income for federal, state and local governments.

But BDI Managing Director Markus Kerber said the change contradicted the country's previous policy of harmonised licensing payments within the Organisation for Economic Cooperation and Development(OECD) and could be harmful in the long run.

"The decision is a counterproductive signal for Germany as a research and development site," he said, adding that Germany could ultimately see a drop in tax income if other countries followed Germany's lead.

(Reporting by Andrea Shalal; Editing by Catherine Evans)