The influential Council of Economic Experts is advocating for a significant overhaul of Germany’s inheritance tax system, specifically targeting the preferential treatment afforded to inherited business assets. Monika Schnitzer, chairwoman of the council, argues that the current system creates a demonstrable imbalance, disproportionately taxing private household wealth while shielding the operational assets of family-run businesses.
Speaking to the “Rheinische Post” Schnitzer questioned the long-held policy of largely exempting business assets from inheritance tax, deeming it “not necessary from an economic perspective”. She asserted that a higher tax rate on such inherited wealth is feasible without jeopardizing employment and more importantly, represents a vital step towards greater tax fairness.
Schnitzer’s proposal takes into account the reality of wealth distribution in high-value inheritance scenarios. She pointed out that inherited companies often exist alongside substantial additional assets such as liquid funds, artwork, classic cars and even private jets. She contends that increased taxation in these circumstances, supported by international research, would not negatively impact job creation.
Acknowledging concerns about potential economic repercussions, Schnitzer suggests that business owners can mitigate any impact through strategic financial planning and the accumulation of reserves, with potential tax liabilities deferred over time. This nuanced approach aims to address criticisms that might arise from a more aggressive tax regime.
The debate is intensifying as Germany awaits a landmark ruling from the Constitutional Court expected in the new year. This judgment concerns the legality of existing inheritance tax regulations and Schnitzer anticipates that the current system’s preferential treatment for business assets is unlikely to be upheld. The court’s decision will likely shape future inheritance tax policy and Schnitzer’s influential stance suggests a shift towards greater equity could be imminent, potentially triggering a significant political and economic reckoning regarding the inheritance of wealth within Germany. The proposals highlight a growing tension between maintaining a business-friendly environment and ensuring a more progressive tax system.
