26-03-2025
German top court rejects challenge to reunification tax
Germany's Constitutional Court on Wednesday rejected an attempt by six politicians from the pro-business Free Democratic Party (FDP) to abolish an additional tax originally introduced to finance the costs of German reunification.
The court ruled that the government still has legitimate financial needs related to reunification but emphasized that the so-called solidarity surcharge cannot be permanent. If the need disappears, the tax could become unconstitutional, the judges said.
A ruling against the surcharge could have left a €12.75 billion ($13.8 billion) gap in this year's federal budget and potentially forced the government to repay around €65 billion collected since 2020.
The FDP challengers argued that the surcharge lost its legal basis after Solidarity Pact II, which provided for special funding aimed at narrowing the economic gap between the formerly communist East and West Germany, ended in 2019.
They also claimed the tax unfairly targets high earners while most taxpayers no longer pay it. Since 2021, only top earners, companies and investors have been required to pay the 5.5% surcharge on income, corporate, and capital gains taxes.
About 6 million individuals and 600,000 companies are still subject to it, according to the German Economic Institute.
However, the court found no violation of the principle of equality.
The German government defended the tax in court during a hearing in November, arguing that reunification costs continue and that a surcharge does not have to be tied to a single, specific expense.
