Financial aid for the wealthy elite

In the heart of Europe, Germany is grappling with an issue of wealth distribution and tax fairness. The spotlight is on inheritance taxes, a subject that has sparked heated debates among politicians, tax experts, and citizens' movements.

Last year, the peak of 13.5 billion euros was reached for inheritance and gift taxes, a significant increase from 5.5 billion euros ten years ago. However, these official figures have been criticized as little informative or misleading, especially for large fortunes, according to tax lawyer Julia Jirmann.

The privileging of business assets, a policy aimed at securing the continued existence of craft businesses and Small and Medium Enterprises (SMEs) in Germany, is a significant factor contributing to this perceived misleading nature. In 85% of cases, the so-called business assets exemption prevents taxes from being paid for the inheritance of businesses.

The increase in inheritance and gift taxes has been a contentious issue, with critics like Jirmann raising concerns as early as January 2024. Despite this, the taxable acquisition of inheritances and gifts increased from 58.3 billion euros in 2022 to 64.7 billion euros in the past year.

The privileging of business assets in inheritance tax is currently under review and could face a partial end. Finance Minister Lars Klingbeil (SPD) has proposed increasing the taxation of the wealthy, aligning with the demands of a coalition of Network Tax Justice, Citizens' Movement for a Financial Turnaround, and the wealth organization Taxmenow, who demand the abolition of privileges for the wealthy.

The state is waiving revenues of 3.4 billion euros to the benefit of the wealthy, according to the alliance, which includes organizations like Attac, Oxfam, and Verdi. In 2024, 45 wealthy individuals inherited a total wealth of almost 12 billion euros, but on average paid only around 1.5% in taxes.

Several proceedings on inheritance tax are currently pending before the BVerfG, and the Left Party chairman Jan van Aken suggests abolishing the need for a wealth tax review, which would increase revenues without raising taxes for anyone. The coalition has launched a campaign under the title "Matter of Honor Inheritance Tax: No Exceptions for Billionaires!"

The official statistics only capture a fraction of the wealth transfers in Germany, with estimates suggesting around 400 billion euros are inherited annually. The acquirer of a business must continue the business for at least five years to avoid paying inheritance taxes under the business assets exemption. The profits earned after the reference date and gifts to children remained unconsidered in the exemption needs review in the past.

The legislator introduced the business assets exemption with good intentions, but its far-reaching privileging has been repeatedly criticized by the Federal Constitutional Court. In the past, smaller reform steps have been taken by the grand coalition in response to these criticisms.

As the debate continues, it is clear that the issue of inheritance taxes and wealth distribution in Germany is a complex and sensitive one, with various perspectives and interests at play. The future of inheritance tax policies in Germany remains uncertain, with calls for reform and fairness echoing through the halls of power.