Two partners in Germany's ruling coalition have been accused of accepting large donations from the hotel industry in return for tax breaks.
Germany's business-friendly Free Democratic Party (FDP) and the conservative Christian Social Union (CSU) came under fire on Monday for accepting large donations from the hotel industry, which critics say is linked to political support for major tax breaks.
The opposition Social Democratic Party (SPD) say there is a connection between a 1.1 million euro ($1.6 million) contribution from a hotel company and a major tax break for hotel accommodation which was pushed through by the FDP. The value-added tax (VAT) on room charges was slashed this month from 19 to 7 per cent.
Substantia, a company run by Finck family member August Baron von Finck, made the donation to the FDP between 2008 and 2009. The magazine Der Spiegel reported it was the largest donation in the party's history.
SPD party leader Sigmar Gabriel said Substantia's donations to the FDP showed why Chancellor Angela Merkel's ruling coalition was so eager to offer a "tax handout" to the hotel industry.
Senior Green party member Renate Kuenast agreed with the SPD's allegations that there was a link between the tax break and the party donations.
"On the one hand, VAT for hotels is reduced. On the other, the FDP receives a million-euro donation from the hotel sector," she said.
In addition, the SPD says the CSU received 820,000 euros in donations from two other companies owned by the Finck family. CSU party chief Horst Seehofer has denied the allegations, saying that no donations were received from any of the family's businesses.
FDP foreign minister Guido Westerwelle dismissed the allegations, calling them "absurd accusations."
Foreign Minister Guido Westerwelle of the FDP calls the allegations "absurd"
The FDP also said there was no direct relationship between the lowered tax for hotels and donations from the hotel industry, since the party had been supportive of a hotel tax break plan since 2007, before the donations in question.
The hotel industry had welcomed the tax cut, saying it would help strengthen growth. However, surveys done by news agencies suggest many hotels have held their tax-inclusive room rates steady, keeping the tax benefits for themselves.
Companies run by the prominent Finck family are said to have donated large sums of money to both the CSU and FDP. The family has a stake in 14 Moevenpick luxury hotels in Germany.
The allegations the donation scandal surfaced on the same day that that trial began of Karlheinz Schreiber, a lobbyist and arms dealer who was allegedly involved in a secret donations scandal in the 1990s.
Editor: Kyle James