Finance Minister Lindner corrects unconstitutional tax rate
Dlike Federal Ministry of Finance proposes a significant reduction in interest on additional tax claims and tax refunds. The corresponding rate is to drop from the current 0.5 percent per month to 0.15 percent, i.e. 1.8 percent per year. Every three years it should be checked whether the rate is still appropriate.
This emerges from the draft bill to amend the tax code, which is available to the FAZ. However, changes are still possible here, since the federal states have to agree to the new regulation. As a result of the new regulation, the federal, state and local governments are threatened with significant revenue shortfalls, and vice versa, citizens and companies will be relieved accordingly on balance.
For this year, the Federal Ministry of Finance is expecting a drop in revenue of almost 2.5 billion euros for the Treasury. Further defaults are expected in subsequent years, starting at EUR 530 million and later increasing to EUR 800 million per year.
Businesses pay interest on back taxes
Interest on additional claims and reimbursements generally begins 15 months after the tax was incurred. There were slightly longer deadlines for the 2019 and 2020 assessment periods due to the corona pandemic. For income tax 2019, it started at the beginning of October 2021, for 2020 it will start in the middle of this year.
The annual interest rate of 6 percent has not changed since it was introduced in 1961. In view of the extremely low interest rate environment, this has been criticized for a long time, since the purpose of the regulation was to balance out the liquidity advantages that arise when taxes are assessed and due by taxpayers at different times.
At a time when there was practically no interest, the old system was obviously outdated. But it was only last summer that she dismissed it Federal Constitutional Court. It ruled that this rate of interest was appropriate only up to 2013. After that, it became unconstitutional, but was still applicable up to and including 2018.
Karlsruhe forced Berlin to make new arrangements
The highest judges have obliged the legislator to make new regulations for all cases still open from 2019 onwards by July 31, 2022. Bavaria’s Finance Minister Albert Füracker (CSU) recently called for the interest on tax payments to be completely abolished. “A constantly changing interest rate is not only non-transparent, but also involves a lot of bureaucracy and is very complex to implement.”
In view of such positions, Federal Finance Minister Christian Linder (FDP) does not rule out going down to 0.1 percent per month, i.e. 1.2 percent per year, according to everything that is heard in Berlin. He is also said to consider shortening the review period to two years conceivable.
However, Lindner rejects the abolition of full interest as demanded by Füracker. According to the justification for the law, the mutual compensation of interest and liquidity advantages and disadvantages would thus be given up without replacement. “This would particularly benefit those taxpayers who submit incomplete or incorrect tax returns or delay the completion of tax audits.”
EU law also requires interest
In addition, EU law would require the creation of a new and independent interest rate regulation for sales tax in this case. “In addition, the reintroduction of full interest would be associated with rising interest rates with considerable administrative effort.”
The bill from the Treasury Department says nothing about adjusting other fiscal rates such as deferral, evasion and suspension rates. “The question of whether and to what extent these regulations should also be adapted in view of the decision of the Federal Constitutional Court still requires detailed examination.” It should be borne in mind that the judges themselves deliberately refrained from specifying anything.
The draft bill also excludes the discount rate for pension provisions, which was also frozen at 6 percent. A separate procedure is pending at the Federal Constitutional Court for this purpose. If this rate were also to be brought closer to the market interest rate, the companies that have made such commitments would be significantly relieved – and conversely the tax authorities would be significantly burdened.