(de-news.net) – Monika Schnitzer, the chair of the German Council of Economic Experts, has argued that a comprehensive and carefully structured revision of the inheritance‑tax system had become unavoidable. She maintained that, although the Social Democratic Party’s proposal had revived political discussion and drawn renewed public attention to the issue, the need for reform stemmed primarily from the Federal Constitutional Court’s repeated criticisms of the existing rules as well as from an additional case still pending before the court. For Schnitzer, these legal developments demonstrated that legislative adjustments were necessary irrespective of shifting political priorities or broader economic conditions.
Schnitzer further asserted that the current system systematically favored large‑scale wealth transfers, particularly those involving business assets. She emphasized that the taxation of inheritances and gifts in Germany remained highly uneven: taxable transfers valued between 100,000 and 200,000 euros faced an average tax burden of roughly 13 percent, whereas transfers exceeding 20 million euros were effectively taxed at only about 8 percent. In her view, this disparity entrenched long‑standing patterns of wealth concentration and conflicted with the ability‑to‑pay principle that underpins equitable taxation. She also noted that inheritances and gifts constituted between 30 and 50 percent of private wealth in Germany, underscoring the structural significance of these transfers for overall wealth distribution.
Addressing concerns that a more uniform taxation of business assets might endanger companies, Schnitzer dismissed such fears as unsupported by empirical evidence. She pointed to international and domestic studies indicating no consistent negative effects on investment behavior or employment levels when business assets were taxed more evenly. Any liquidity challenges arising at the moment of transfer, she argued, could be mitigated through generous deferral mechanisms; the SPD proposal envisioned a 20‑year deferral period specifically to ease such pressures. She considered this approach more targeted and less distortionary than the current exemption regime, which she believed constrained entrepreneurial decision‑making through payroll and continuation requirements.
In contrast, Gitta Connemann of the CDU, who leads the Mittelstands‑ und Wirtschaftsunion, sharply criticized the SPD’s plans. She warned that a five‑million‑euro exemption would affect a substantial share of business transfers, given that 99 percent of Germany’s nearly 3.9 million firms were classified as small or medium‑sized enterprises. Connemann argued that the proposal amounted to a tax on business substance—one that the Mittelstand could not absorb, particularly in a competitive environment already strained by comparatively high tax burdens. She stressed that many family‑run enterprises or agricultural operations, such as a bakery with its building and production facilities, could easily reach asset valuations of five million euros. In such cases, she argued, heirs might be forced to sell parts of the business merely to meet tax obligations, a development she believed would ultimately threaten both employment stability and vocational training opportunities.
Hanno Kube, a tax‑law scholar at Heidelberg University, suggested that the SPD’s concept might raise constitutional concerns. He argued that the absence of differentiated exemptions based on degree of kinship conflicted with Article 6 of the Basic Law, which protects the family and, in his view, applies directly to inheritance matters. Because the constitution distinguishes among familial relationships and separately safeguards marriage, Kube regarded the SPD’s intention to reduce the relevance of kinship in tax classifications — and in the proposed lifetime exemption — as potentially problematic from a constitutional standpoint.
Under the SPD proposal, each individual would receive a lifetime exemption of one million euros for tax‑free inheritances. Business assets valued up to five million euros would remain untaxed, while existing relief provisions for business heirs would be abolished. To prevent liquidity shortages and ensure that firms could continue operating without undue financial strain, the party proposed allowing tax liabilities to be deferred for up to 20 years.
