Germany’s Constitutional Court on Wednesday upheld the solidarity tax that was introduced after the reunification of East and West Germany in 1990.
Six members of the pro-free market Free Democratic Party (FDP) had challenged the tax, claiming that it violates the constitution because the government’s Solidarity Pact II that the tax was part of expired in 2019.
They also claimed the tax violated the principle of equal treatment because most taxpayers — around 90% — had been exempt from the levy in recent years.
However, a judge at the Constitutional Court in Karlsruhe ruled that these complaints were unfounded because additional financing was still needed as a result of German reunification.
The judge nevertheless emphasized that the solidarity tax was a temporary measure that would become unconstitutional if the need for it disappeared.
What is the solidarity tax?
The solidarity tax was introduced by the German government in 1991 to help cover the costs of reunification and support infrastructure in the formerly Communist eastern states.
It has been reformed in the years since then, sitting at 5.5% of income.
The number of German taxpayers subject to the levy has fallen to 10% recent years — making up the highest income earners. Companies and investors are also subject to the 5.5% tax.
“The fact that the solidarity surcharge now only applies to top earners does not make it any less legitimate — on the contrary: it is now more urgently needed and fairer than ever,” German tax expert Julia Jirmann told Reuters news agency.
Government defends solidarity tax
Last year, the solidarity tax brought in around €12.6 billion ($13.6 billion) to German government coffers.
If the tax had been declared unconstitutional, it would have created similarly sized a hole in the upcoming budget.
It also would have forced the German government to pay back around €65 billion collected since 2020.
The German government defended the tax in court at a hearing last year. It argued that costs associated with Germany’s reunification are still ongoing and that the tax does not have to be tied to a single, specific expense.
Edited by: Wesley Rahn
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