The head of the German Council of Experts for Economic Analysis, Monika Schnitzer, is forcefully advocating for a reform of inheritance tax, arguing it’s an unavoidable necessity irrespective of current economic conditions or political expediency. In a commentary published in the Handelsblatt, Schnitzer highlighted the pressing need for change, spurred in part by the recent proposal from the Social Democratic Party (SPD), though she contends the reform itself must go much further.
Schnitzer’s call comes amid renewed scrutiny of the existing legal framework, which has faced repeated criticism from the Federal Constitutional Court, with further legal challenges currently pending. She points to a systemic bias that disproportionately favors large-scale asset transfers, particularly concerning business assets. Currently, inheritance and gift taxes in Germany operate with a significant disparity, she argues, creating a situation where smaller transfers between €100,000 and €200,000 are taxed at an average of around 13%, while extremely large transfers exceeding €20 million face an effective tax rate of just 8%.
“This unequal treatment contradicts the principle of ability to pay and contributes to the entrenchment of wealth inequality” Schnitzer stated. She underscored the substantial impact of inheritance and gifts on the nation’s wealth distribution, noting that between 30 and 50% of Germany’s private wealth originates from these sources. This perpetuates a cycle of intergenerational wealth concentration, raising questions about fairness and social mobility.
Addressing concerns frequently voiced about potential negative consequences for businesses if inheritance tax on business assets is more equitably applied, Schnitzer dismissed these fears as unfounded. She cites international studies demonstrating a lack of consistent negative effects on employment or investment resulting from such measures. She proposes solutions to mitigate any potential liquidity burdens at the time of transfer, emphasizing the viability of generous deferral schemes, such as the 20-year timeline outlined in the SPD’s proposal – a more targeted approach compared to the existing, often distorting, business succession regulations.
Schnitzer’s intervention injects a significant element of urgency into the debate, implicitly criticizing the disproportionate reaction to the SPD’s proposal and suggesting that a more comprehensive and equitable overhaul of the inheritance tax system is not simply desirable, but crucial for ensuring fairness and promoting a more balanced distribution of wealth within Germany. The inherent political sensitivities surrounding such a reform remain considerable, but Schnitzer’s position represents a powerful voice advocating for decisive action.
