BERLIN, Aug 30: The German government responded to a growing rebellion over reforms to local business tax by offering on Saturday to consider changes to its proposal.

We are naturally open to discuss details of the proposal and possible improvements, a finance ministry spokesman told Reuters.

He had been asked to comment after newspapers quoted government parliamentarians calling for changes to be made to tax plans that have aroused fury among small firms, doctors, lawyers and other groups likely to be affected.

Reform of local business tax is the key to government plans to cut the level of unemployment assistance, paid by the federal government, and merge it with social welfare benefits that are currently paid for by local authorities.

The government says the measures together would save local authorities some 4.5 billion euros next year, rising to five billion euros a year from 2005, and give a boost to badly-needed public investment.

Local authorities can currently levy up to 15 per cent on big firms’ taxable income, but low profits due to a weak economy and earlier tax reforms have emptied coffers. Many towns have been forced to close down public amenities like swimming pools.

The government proposes to stop the rot by raising local authorities’ claim on value added tax (VAT) revenues and widening the local business tax base to include self-employed people such as lawyers and doctors.

But the opposition and even members of German Chancellor Gerhard Schroeder’s Social Democrats (SPD) have cast doubt on the government’s sums.

We share the view that the volume of relief and some elements of the reform must be seen as insufficiently thought through, the SPD in Lower Saxony, Schroeder’s home state, said in a statement on Saturday.

In an interview with Berliner Zeitung newspaper, the SPD finance minister of the state of Schleswig Holstein was quoted as saying he saw “hardly any chance” of saving the proposal.

Because it touches on all levels of public finance, the local business tax reform must also win support in the opposition-controlled Bundesrat upper house of parliament.

In an interview with Reuters on Saturday, the Christian Democratic finance minister of Bavaria, Kurt Faltlhauser, signalled the opposition would not block a reform outright.

There will be a solution, Faltlhauser said, predicting a compromise in mediation talks likely to take place in November. —Reuters