Vodafone bought Mannesmann in 2000 for $180bn

Vodafone wants to offset a 50bn euro ($61.5bn, �33.25bn) write-down in the value of its German business against tax, depriving the state of up to 20bn euros.

German politicians have attacked the plan, saying it effectively forces taxpayers to fund the Mannesmann deal.

A member of the ruling Social Democrats said they would try to block the move.

The party would do what it could to "prevent the company from doing it like this," SPD General Secretary Klaus Uwe Benneter said earlier this week.

Account adjustment

Vodafone has said it needs to reduce the book value of its German acquisition to take account of a sharp drop in telecom share prices since the deal was completed.

The company has argued that offsetting the sum written down against tax is in line with German law, and is common practice in the telecoms industry.

Vodafone's proposal is currently being weighed up by the tax authorities in the state of North Rhine-Westphalia, where the firm has its German base.

A final decision may not be reached for up to three years.

But there has been speculation that the authorities in North Rhine-Westphalia may come under political pressure to reject the proposal, which comes as the Social Democrats are struggling to hold onto power in the state.

At the same time, North Rhine-Westphalia's finances are overstretched because of weaker-than-expected tax revenues.

Resentment

Germany's federal finance ministry said in a statement that under German law, tax write-downs must be based on a lasting decline in share prices rather than a short-lived dip.

The hostile takeover of Mannesmann four years ago caused dismay in Germany.

The $180bn tie-up, at the time the biggest in corporate history, was widely portrayed as an assault on Germany's social market economy by the forces of untrammelled capitalism.

The controversy surrounding the deal deepened after it emerged that a handful of Mannesmann directors were paid hefty bonuses once the merger was complete, while many rank and file employees lost their jobs.

Six former Mannesmann directors, including five who received bonuses, are currently standing trial for breach of trust.