Federal Ministry of Finance gives up defense of the solidarity surcharge
Dhe Federal Ministry of Finance is distancing itself from the solidarity surcharge. According to information from the FAZ Christian Lindner (FDP) personally decided that his house would withdraw from a procedure before the Federal Fiscal Court. On Wednesday, the highest court in tax matters was informed about the remarkable step taken by the FDP politician. He is correcting a decision made by his predecessor Olaf Scholz (SPD), who is now known to be in the Chancellery.
It cannot be assumed that Lindner coordinated his decision with the coalition partners. The SPD and the Greens are on a fundamentally different course in tax policy; they would probably extend the solidarity surcharge or add a second one if the FDP played along.
The oral hearing on the question of the constitutionality of the solidarity surcharge in the current legal regulation before the Federal Fiscal Court in Munich. In a test case by the taxpayers’ association, a couple from Bavaria is contesting the determination of the advance payments for the solidarity surcharge for the years 2020 and 2021.
No representative of the ministry in Munich
According to the plaintiffs, the constitutional basis for levying the solidarity surcharge ceased to exist in 2020 because Solidarity Pact II expired at the end of 2019. In the first instance, the Nuremberg Finance Court did not follow the arguments of the plaintiffs and dismissed the lawsuit. The couple then applied for an appeal to the Federal Fiscal Court. Contrary to what was initially planned, no representative of the Federal Ministry of Finance appear and defend the “Soli”.
At the beginning of 2021, the solidarity surcharge was abolished for most taxpayers – at least for income tax. Only about 3.5 percent of the old “Soli” payers will continue to be asked to pay. Since then, around 90 percent have been completely spared the tax surcharge introduced in the 1990s to finance reconstruction in East Germany. Another part of the taxpayers is at least partially exempt from the additional burden. This supplementary tax will continue to be levied on the corporation tax and the withholding tax.
The topic is excluded from the coalition agreement
In the coalition agreement, the traffic light partners have excluded the sensitive issue of the solidarity surcharge. The FDP has long been in favor of completely abolishing the solos because the old justification has been dropped. Federal Finance Minister Lindner still believes that the complete abolition of the solidarity surcharge is desirable, even if this does not win a majority in the traffic light coalition. Irrespective of this, the Federal Ministry of Finance advocates a clarification by the highest court of the constitutionality of the solidarity surcharge.
From the point of view of the Federal Ministry of Finance, the complete abolition of the solidarity surcharge would be economically correct, as it confirmed in a policy paper on economic and financial policy after Christmas. This is based on the following assessment: The effective and nominal tax burden for companies in Germany are among the highest in an international comparison. The importance of tax policy for competitiveness has been ignored for too long. In Germany, people relied on the fact that the high effective load would be compensated for by other location factors. This phase has ended. Improving the competitiveness of Germany as a business location is now urgently needed.
For Lindner, the complete abolition of the solidarity surcharge is also a question of political credibility. Because the expectation of the citizens and the affected companies was that the solidarity surcharge was introduced for a limited period of time to meet the challenges of reunification.