Germany’s Federal Constitutional Court is to decide the fate of the country’s highly controversial solidarity tax (Solidaritätszuschlag – Soli), following the recent announcement by Lower Saxony’s Finance Court that the surtax is “unconstitutional”.
In accordance with 1954 legislation, Lower Saxony’s Finance Court has ruled that, as a supplementary tax, Germany’s solidarity tax should only be used to cover temporary surges in demand and not to cover long-term costs associated with reunification.
Indeed, the controversial tax is under attack from all sides, as politicians from both the Christian Democratic Union (CDU) and the Free Democratic Party (FDP) have called for its abolition.
It was the CDU’s General Secretary, Thomas Strobl, who first urged the government to abolish the unpopular tax, while recognizing the need to consolidate the country’s budget first. According to Strobl, the abolition of the solidarity tax is both a simple and effective means of reducing the burden on employees in East and West Germany.
Members of the FDP also welcomed the latest ruling. Carl-Ludwig Thiele, the financial speaker for the party, emphasized the need to progressively abolish the surtax within the framework of a comprehensive reform of the country’s taxation, and by 2019 at the very latest – the date when the second solidarity pact (Solidaritätspakt) is due to end.
The German Association of Taxpayers (der Bund der Steuerzahler – BdSt) has also expressed its support for the decision. According to the BdSt’s President, Karl Heinz Däke, a revision of the Soli will serve to guarantee legal certainty, and will make it harder for the government to levy further surtaxes in future.
Introduced in 1991 in the wake of reunification, and levied on both personal and corporate income, the tax was designed to finance economic development in former Eastern Germany. Although it was initially introduced for a year, it was then reintroduced in 1995 at a rate of 7.5% for an unlimited period.
Since 1998, the surtax has remained static at 5.5%.
The abolition of the tax is expected to result in losses for the state amounting to billions of euros.
.
Network Tweets
Network BlogsContent
provided by
|
Archive | Resources | Partners | Site Map | Links | Newsletter Archive | Contact | RSS Feeds | About | Syndication | Advertising & Marketing | Recruitment | Terms & Conditions | Privacy & Cookies
Copyright © 2012 - All Rights Reserved - Tax-News.com
IMPORTANT NOTICE: Tax-News.com has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments.
Write a comment