Plan to End a Tax Sends German Stocks Soaring

German stocks surged Thursday as the government said it plans to drop a tax on asset sales by companies, paving the way for major companies to sell stakes in industries worth about $100 billion and change the corporate landscape in Europe’s biggest economy.

Allianz and other major stocks soared and the DAX index posted its biggest gain since March 12--when Oskar Lafontaine quit as finance minister--on optimism that companies will make better use of cash tied up in long-term holdings. Allianz, Europe’s second-biggest insurance company, owns $30 billion worth of shares in companies including RWE and Bayer.

Chancellor Gerhard Schroeder’s plan to end the tax, which needs parliamentary approval, would clear the way for the biggest change in corporate Germany since World War II. Companies are under pressure to earn more for shareholders as the introduction of the euro breaks down barriers to investment abroad.

The tax rate on such sales for companies can be as high as 50%. In the U.S., the rate is a maximum 35%.

Allianz shares rose 12% and Munich Re jumped 17%. Deutsche Bank rose 15% and Dresdner Bank gained 11%.

The main DAX stock index zoomed 289.86 points, or 4.5%, to a record 6,782.39.

Markets across the rest of Europe also rose sharply. France’s main index gained 2%, Britain’s advanced 0.7%, Sweden’s rose 1.5% and Italy’s climbed 1.9%.

“The proposal is remarkable,” said Wolfgang Skorpel, a tax expert at the German Banking Assn. “In principle, it would make restructuring a lot easier.”

Still, implementation is a “long way off,” he said, adding that “one shouldn’t raise one’s hopes too early” because negotiations in the lower and upper house of parliament could alter the plan.