German Chancellor Angela Merkel's conservative Bavarian allies signalled on Thursday that they wanted to limit pay for top managers ahead of a September election after the Social Democrats (SPD) presented a draft law on the issue.

The SPD, which has surged in opinion polls in recent weeks, wants to discourage corporations from granting high pay packages to top managers by capping the tax deductions the firms can get through writing them off as business expenses

"It's not acceptable for citizens and also not appropriate in a social market economy for managers to earn one hundred times what average earners in the same company get," Gerda Hasselfeldt, a senior member of the Christian Social Union (CSU), told the Passauer Neue Presse newspaper on Thursday.

She said the conservatives had not yet received a copy of the SPD's proposal but added: "When we do, we'll investigate whether we can use it to curb excessive wages. More transparency or limiting tax deductibility are approaches worth discussing."

The SPD wants to limit the tax deduction at €500,000 annually for members of a listed corporation's management board.

Board members in large corporations can earn much more in salary and benefits, but payments above that level - which are currently tax-exempt business expenses - would cost the company more in tax because it could not write them off.

The SPD, which is the junior partner in Merkel's ruling coalition, will only submit the law to parliament if the conservatives agree to the draft.

Reuters