"Somebody has to pay for it": family entrepreneurs are trembling before the federal election

Mr Rödl, a survey in April showed that family entrepreneurs see tax and levy policy as the greatest threat to their wealth.

Is this fear justified?

Mark Fehr

Editor in business.

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Yes, many of our clients also find it threatening what is brewing in terms of tax policy in the parties' programs for the Bundestag election.

Even if much is not yet concrete, the idea of ​​reviving the wealth tax hovers like a sword of Damocles over the entrepreneurial families.

A tightening of inheritance tax is also being discussed, and the industrialized country organization OECD is urging the coming federal government to increase inheritance tax.

Because of the corona pandemic, Germany has taken on higher national debts than ever before, and record new debts of 240 billion euros are also planned for the current year.

Somebody has to pay for it.

Who will protect entrepreneurs from this?

The FDP and parts of the Union are calling for lower taxes, but that is not really reassuring. Nobody can foresee the outcome of the federal election, only one thing is fairly certain: We will probably get a coalition government, so there is a risk that compromises will be made. A coalition partner could have his approval of higher taxes bought off by a concession elsewhere. Even Friedrich Merz said that assets that go beyond family assets can be taxed more broadly with low tax rates. I interpret this as a consideration of at least noticeably reducing the sparing of entrepreneurial assets. The fact that such a statement came from an economic expert from the Union, of all people, shocked many entrepreneurs.

Low single-digit tax rates are being discussed for a tax on large assets, even the Left Party is only demanding 5 percent. Inheritance tax rates are also much lower than for other types of tax. Aren't the entrepreneurs' fears exaggerated?

The fears are justified, because taxes on assets and inheritances are due even if the taxpayer has not made any profit or even makes losses. The tax must then be paid out of the substance, which can result in creeping expropriation - especially in times of crisis. In case of doubt, the affected companies have to lay off employees, forego investments to the detriment of their future viability or even sell parts of the company in order to be able to pay the tax. Even for profitable companies, a wealth tax with single-digit tax rates can lead to a reduction in profit after tax of 25 percent or more, mind you in addition to the previous burden of corporation tax or income tax, trade tax and solidarity surcharge. There isn't much left then.

The wealth tax was levied for the last time in 1996 after the Federal Constitutional Court ruled that it was in conflict with equality. Does wealth tax even have a legal chance of making a comeback?

It would be conceivable to bring the wealth tax into a constitutional form in order to be able to raise it again.

The legislature would have to repeal the preferential treatment of real estate, which was criticized by the Federal Constitutional Court at the time, and introduce a valuation based on the market value.

This also worked in a similar way in the case of inheritance tax, in that the legislature reacted to a ruling by the Federal Constitutional Court in 2014 and revised the rules on preferential treatment for business assets.

However, this path is rocky.

The legislator has to bring many requirements under one roof.

How difficult this is can also be seen in the case of inheritance tax, which in my opinion is still unconstitutional in parts even after a third attempt at reform.

Why don't you complain against it?

For this you needed the case of a person concerned who dares to sue on the way through the instances to the Federal Constitutional Court. This is only possible in this way, because, unlike federal and state governments, individual citizens do not have the option of demanding an abstract control of norms. Such an expensive and nerve-wracking process would take many years, always with the risk of losing in the end. Without a doubt, however, fundamental proceedings will be conducted against the current and also against a future tightened inheritance tax, as well as against any wealth tax.