Berlin cracks down on Monaco on the North Sea

Monaco on the Mediterranean can breathe a little easier.

The tiny North Sea hamlet of Norderfriedrichskoog -- which bills itself as “Germany’s Monaco on the North Sea” -- is about to forfeit its status as a corporate tax haven. The country’s Parliament is expected to pass a law this month obliging all towns in the country to levy a minimum 6.4 percent municipal trade tax on local companies.

Norderfriedrichskoog, because it is one of just two German towns that don’t impose the 100-year-old tax, has been able to attract about 250 corporate “headquarters” -- which mostly consist of tiny administrative offices or rooms rented from one of the village’s 45 residents. Among them are subsidiaries of Deutsche Bank and Eon, a big utility.

Trying to preserve the town’s tax status, a local councilman, Hans Kremer, has written dozens of letters to legislators and government officials. “Politicians think the companies registered here will return to their original hometowns if the tax reform goes through,” mutters Kremer, 56, a former Berlin restaurateur. “But German taxes will still be higher than those in most neighboring countries [like Luxembourg and the Netherlands], leading companies currently in Norderfriedrichskoog to move cross-border and not back home.”

Norderfriedrichskoog has never bothered to impose the tax, because it hasn’t really needed the money. The town has socked away E500,000 ($588,000) over the past 30 years by selling land reclaimed from the seabed after dike construction to farmers. And maintaining just five roads and cart paths was never much of a drain on the budget.

Kremer and his wife, Karin, who now tend to the administrative chores of six companies from their brick cottage, are prudently learning the rudiments of cattle-raising.

Related