German Court Rules Tax On Speculative Gains From Share Deals 'Unconstitutional'

by Ulrika Lomas, Tax-News.com, Brussels

22 July 2002

German newspaper, Handelsblatt reported on Thursday that the country's senior financial court has ruled that a tax on speculative gains from share deals may be unconstitutional, because the Finance Ministry does not have the resources to carry out investigations into gains which remain undeclared.

According to Handelsblatt, the case was brought by tax expert, Klaus Tipke, who 'had argued that those who honestly filled out their tax returns had to pay the tax, but many did not do so and escaped the tax as the Finance Ministry was incapable of checking their gains from share deals.'

The court revealed that it would be referring the case on to the Federal Constitutional Court, but in the interim ruled that the Finance Ministry's inability to fully enforce the tax means that it could be unconstitutional because it prevents equal treatment of all forms of income.

Although Germany has taxed speculative gains (gains on shares sold six months after their purchase) of up to 512 euros for several years, the current government altered the definition of a 'speculative gain' in 1999, applying it to shares sold up to a year after their purchase.

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