Federal Fiscal Court considers solidarity surcharge to be lawful

Dhe 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. In contrast to the plaintiffs, the financial judges found it irrelevant whether the income from the solidarity surcharge was used for the construction of the East or not. This lies in the freedom of design of the legislature.

The highest German tax court ruled that the income tax surcharge is still covered by the Basic Law. Mere doubts about this were not enough to submit the “soli” to the Federal Constitutional Court, said the presiding judge and president of the BFH, Hans-Josef Thesling. It is irrelevant whether the supplementary tax is earmarked for the construction of the East. The Soli is thus independent of the expiry of the solidarity pact. In addition, there are still additional expenses for the state due to reunification.

According to the Federal Fiscal Court, the federal government’s income from the solos amounted to 11 billion euros. If the levy were to be declared unconstitutional one day, the question would be whether the federal government would have to pay back its solidarity surcharges.

A couple complained

An elderly couple from Aschaffenburg complained. With the support of the Taxpayers’ Association, it wanted to bring down the “Soli”. They referred to two points: the solidarity surcharge was intended to finance the burdens of German unity, but this purpose has not been used since 2019. At that time, the Solidarity Pact II expired, and since then there has been no special funding for the East German states.

In addition, the plaintiffs and their lawyers accused the federal government of violating the principle of equality in the Basic Law, because only a small minority of taxpayers have to pay the tax, but not the vast majority.

With the law on the return of the solidarity compensation from 2019, the then grand coalition decided that only higher earners – the top ten percent of incomes – would have to pay the surcharge. The remaining ninety percent of taxpayers should remain exempt. According to the plaintiffs’ lawyer, about 2.5 million people are still paying the solos.

Taxpayer President Reiner Holznagel previously stated that the process was an important stage. The lawsuit was at least tacitly supported by Federal Finance Minister Christian Lindner (FDP), who wants to abolish the solos anyway. The ministry originally joined the proceedings before the Federal Fiscal Court. This is common in cases where the ministry rejects a claim. Lindner had reversed that, however, and the Ministry of Finance is no longer involved in the solidarity process.

The plaintiff called the decision disappointing. “In court and on the high seas, you are in God’s hands,” he quoted an old jurist adage after the verdict. According to him, it has not yet been discussed whether the plaintiff spouses want to file a constitutional complaint. Irrespective of this, FDP members of the Bundestag had already submitted a constitutional complaint in 2020.

The traffic light coalition is divided. The FDP supports the abolition of the soli, the Greens are against it. “It would have been absurd to relieve the richest 10 percent of the country when many people barely know how to pay their bills at the end of the month,” commented the deputy leader of the Greens, Andreas Audretsch.

The Federal Ministry of Finance, headed by FDP leader Christian Lindner, is still counting on Karlsruhe after the verdict. “The federal government has an interest in a constitutional clarification,” it said in ministry circles. In the opposition, the CDU and CSU assume that the soli should not become a perpetual tax. The constitutionality remains dependent on the federal government demonstrating special financial needs for the creation of the unit, said Union parliamentary group vice-president Mathias Middelberg. “In this respect, it is foreseeable that the entitlement of the solo will expire.”

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