The influential Council of Economic Experts (Sachverständigenrat) is advocating for a significant overhaul of Germany’s inheritance tax system, proposing a heightened taxation of inherited business assets. Monika Schnitzer, the council’s chairwoman, argued in an interview with the Rheinische Post that the current preferential treatment afforded to inherited company assets creates a demonstrable imbalance in the tax burden compared to private households.
Schnitzer’s proposal challenges the long-standing practice of largely exempting business assets from inheritance tax, a policy she deems economically unnecessary. She insists a higher tax rate on inherited businesses is feasible without jeopardizing employment, framing it as a matter of fundamental tax fairness.
The rationale behind Schnitzer’s stance is that inheritors often possess substantial wealth beyond the inherited company, encompassing liquid funds, valuable artwork, classic cars and even private jets, particularly in the case of large estates. She maintains that increased taxation in these areas would be viable and, based on international research, would not negatively impact job creation. The implication is that the argument for protecting inherited businesses at all costs is largely unfounded, especially given the overall financial security of many beneficiaries.
Furthermore, Schnitzer suggests that business owners can mitigate potential tax impacts by proactively establishing reserves and deferring tax liabilities over time. This points to a broader debate about the responsibility of wealth holders to contribute more to the public good and to the fairness of intergenerational wealth transfer.
The proposal arrives on the precipice of a significant legal development. The German Constitutional Court is expected to issue a ruling on inheritance tax regulations early next year and Schnitzer anticipates a verdict that will render the current system unsustainable. This impending decision casts a considerable shadow on the future of inheritance tax policy in Germany, potentially leading to a politically charged debate as policymakers grapple with the competing interests of business owners, potential heirs and the state. The council’s intervention underscores the urgency of the matter and the potential for a significant shift in the country’s taxation landscape.