Losing the Losses —The New German Change-of-Ownership Rule

All good comes at a price. The German corporatetax reform is good overall,1 but the major benefit,the tax rate cut, comes with a tightened andhighly detrimental change of ownership rule. TheGerman term Mantelkauf, literally translated as‘‘coat purchase,’’ is deceiving — it sounds and looksas calm and innocuous as a wolf in sheep’s clothing,but there are some merits to this simile. The changeof-ownership rule is nothing but a special antiavoidancerule, since the trade with loss carryforwards fortax purposes can be a worthwhile venture, if notlimited by law, even though it might in the endincrease everything but welfare.[...]