Federal Fiscal Court dismisses lawsuit: Soli is constitutional

Berlin The Federal Fiscal Court (BFH) does not consider the solidarity surcharge in the form that has been in force since 2020 to be unconstitutional. That was the verdict of the highest German tax court on Monday in Munich. This means that the federal government can continue to plan annual solo income in the tens of billions.

The plaintiffs can still appeal to the Federal Constitutional Court, which could overturn the solos. However, the judgment has made such a decision much less likely.

However, the traffic light coalition was still divided on the subject. In 2021, after a reform, the solos were completely eliminated for around 90 percent of all taxpayers. Only top earners and high-earning entrepreneurs still have to pay the surcharge. That’s exactly why the Soli ended up in court.

However, the SPD and the Greens strictly reject relief for high and top earners. On the contrary: you want to burden top earners more. “Today’s decision is an important step, but not the end of the debate,” said Greens parliamentary group leader Andreas Audretsch to the Handelsblatt. “The economists have rightly called for the top tax rate to be raised to finance the crisis.” A “more honest debate about distributive justice and a fair tax policy” is needed.

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The SPD is also very happy about the verdict. “There is still a large state financial need from the German reunification,” said the financial policy spokesman, Michael Schrodi, the Handelsblatt. Referring to the judgement, he cited “disproportionate investment expenditure in the new federal states” and subsidies for pension insurance as examples. The solidarity surcharge in its current form covers this need.

For the FDP, on the other hand, the verdict is a defeat. The party has long been demanding the complete abolition of the solis. The financial policy spokesman for the FDP, Markus Herbrand, called the decision from Munich to the Handelsblatt “a bitter disappointment for the millions affected who, from the perspective of us Free Democrats, have been unlawfully asked to pay for more than three years”.

After the written justification for the judgment has been submitted, it should therefore be examined what possibilities exist to have the constitutionality finally clarified by the responsible Federal Constitutional Court. “It is hard for anyone with common sense to understand that more than 30 years after reunification and more than three years after the end of Solidarity Pact II, taxes are still being levied to cover unit costs.”

FDP speaks of “herber Enttdeception”

The Soli is a supplementary tax to income tax and corporation tax. In the current year, it will bring around twelve billion euros into the federal budget. It has been collected since 1995 to finance German unity. However, the funds were never used exclusively for the construction of the East.

FDP leader Christian Lindner

Federal Finance Minister Christian Lindner (FDP) had decided that his department would not be involved in the BFH proceedings.

(Photo: dpa)

Herbrand went on to say that the FDP continues to believe that the record level of tax revenue “leaves more than enough leeway to finally abolish the additional tax to finance unit costs, which we believe is on very shaky ground”.

Ironically, a good two and a half years ago, the current parliamentary state secretaries in the Federal Ministry of Finance, Katja Hessel FDP and Florian Toncar (FDP), filed a constitutional complaint against the continuation of the remainder of the Solis.

Federal Finance Minister Christian Lindner (FDP) had decided that his department would not be involved in the BFH proceedings – contrary to the position of his predecessor, today’s Chancellor Olaf Scholz (SPD). Lindner’s house did not even send an official to follow the negotiations on site, the Ministry of Finance recently admitted in the Bundestag.

State Secretary Hessel reacted accordingly cautiously to the Soli decision. Take note of the verdict, she wrote on Twitter. Irrespective of this, it is clear that tax policy is becoming increasingly important for Germany’s competitiveness. “The complete abolition of Soli therefore remains the goal for the FDP,” emphasized Hessel. This would be a “good stimulus” for investments and new jobs.

Specifically, the Federal Fiscal Court negotiated a model lawsuit brought by the Taxpayers’ Association (file number IX R 15/20). With the help of the association, a couple from Bavaria had sued. The Nuremberg Finance Court had dismissed the action in the first instance (file number 3 K 1098/19), but allowed an appeal to the Federal Finance Court due to the fundamental importance of the matter.

>> Read here: Who would benefit from the elimination of the solidarity surcharge

The plaintiffs had accused the federal government of violating the principle of equality in the Basic Law because only a small minority of taxpayers had to pay the tax.

With agency material

More: The most important questions and answers on the solo negotiation

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