Finance Minister Oskar Lafontaine said the decision to surrender potential tax income was “very, very painful”.

“But we wanted to give our footballing friends an equal chance,” he told reporters after talks with Franz Beckenbauer and the German Football Federation (DFB) in Bonn.

Beckenbauer, the former soccer captain and coach who is leading the German bid, welcomed the decision, saying it put Germany on a level playing field with rivals also thought to be benefitting from tax exemption.

“We’re catching up pretty well now,” he said. “England got off to a good start but we’ve drawn level now.”

Aside from Germany and England, South Africa, Brazil, Egypt, Morocco, Nigeria and Ghana are bidding for the competition, with the final decision due to be made by soccer’s ruling body FIFA next March.

Under German law, organisers of any cultural or sporting events on German soil have to pay a flat tax rate of 25 percent on revenues.

On television rights for the tournament alone, that would mean FIFA would have to pay back nearly half a billion marks ($282 million) to the German government.