On December 17, 2014, the German tax office suffered a resounding defeat. The German Federal Constitutional Court ruled the inheritance tax unconstitutional and ordered reforms no later than mid-2016. The blanket and almost total exemption for the transfer of business assets went too far for the court.
Additionally, in a dissenting opinion, three of the eight judges noted it is not simply a question of equality in tax reform, but also a matter of equity in the principle of the social state, writing: “It is within the responsibility – and not subject to mere discretion – for lawmakers to compensate for inequalities that would otherwise become even more permanent.”
Naturally, German Federal Minister of Finance Wolfgang Schäuble feels vindicated. He wanted to take the misgivings of the Constitutional Court’s first senate into account but, at the same time, change as little as possible. He presented the cornerstones for this reform in February.