Deutsche Post will lose part of its VAT exemption next July and will have to charge VAT onnon-universal postal service products to create a ‘level playing-field’, the German government
decided yesterday. The German postal regulator has meanwhile called on businesses and consumers toswitch to rival postal operators to generate more competition.The German cabinet approved a draft law to make “urgently necessary adaptations” to bringnational taxation law in line with the latest EU regulations. One major element will be to changeDeutsche Post’s VAT exemption with effect from July 1, 2010, onwards, the finance ministryannounced. The draft law requires approval in both houses of the German parliament.
“In future, universal postal services, with which a basic provision of the population isensured by one or more companies, will be free from VAT. Whoever wants to profit from thisexemption must provide users with a universal service that constantly offers comprehensive postalservices of a certain quality at affordable prices for all users,” the ministry stated. UnderGerman postal law, the universal service covers delivery of private letters up to 2 kgs and ofparcels up to 10 kgs.
The new law means that postal products and services not covered by the universal serviceobligation will be liable to VAT. This would include mail delivery contracts negotiated with largecustomers, heavier parcels and express items. The changes would generate up to €500 million inadditional tax revenues.
The main effect of the law would be to create a level playing-field between the nationalpostal operator and private competitors, who currently have to charge 19% VAT on all theirproducts. The new VAT regulation has long been demanded by Deutsche Post’s competitors who claimthat the present exemption distorts competition in the fully liberalised postal market.
Earlier this week, Matthias Kurth, the head of the German postal regulator, the FederalNetwork Agency (‘Bundesnetzagentur’), publicly declared: “I call on users to look more closely atexisting opportunities to change their postal provider. This applies to both private and businesscustomers who do not yet use all their possibilities.”
According to the agency, the overall German postal market was worth €27 billion in 2008. Themail market was worth about €9.8 billion of the total figure.
In the mail sector, the competitive situation has remained largely unchanged since fullmarket opening at the start of 2008. The 750 mostly small competitors have not been able to achievetheir full potential and their combined market share remained below 10% in 2008. Wide-rangingchanges in the market are likely due to the introduction of electronic and hybrid mail services. “Overall, new products with additional choice will enliven and change the mail market,” Kurthstated.
In contrast, the courier, express and parcel market grew over the last two years and wasworth about €17 billion in 2008. Thanks to strong competition, a diverse range of services hasdeveloped for customers, the regulator pointed out. The CEP market was not expected to grow in 2009but there are signs of recovery for 2010, Kurth commented.
