Tax Reform

A Lost Opportunity

The heirs to the Oetker German foods dynasty. Here, three of eight children of the the late patriarch, Rudolf-August Oetker, from left to right: August, Julia and Alfred Oetker at a Handelsblatt dinner in 2012. Source: Thorsten Jochim for Handelsblatt
Who gets what and how much does the tax collector get? Here are three of eight children of the the late patriarch, Rudolf-August Oetker, shown from left to right: August, Julia and Alfred Oetker.
  • Why it matters

    Why it matters

    A reform of Germany’s inheritance tax code could threaten the very existence of family-owned firms in the country.

  • Facts

    Facts

    • Germany’s top court in December ruled that the government needed a new law by mid-2016 that offered fewer exceptions to the inheritance tax.
    • The finance ministry has proposed to tax inheritance above €20 million by as much as 30 percent.
    • The states of Bavaria and Baden-Württemberg, home to a large number of family firms, oppose the proposal, claiming businesses would go bankrupt.
  • Audio

    Audio

  • Pdf

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.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.