Financial easement for affluent high earners

In the heart of Europe, Germany, around 400 billion euros are inherited every year, according to the Institute for Macroeconomics and Economic Research (IMK). However, the official figures on inheritance tax are considered little informative or misleading, especially for large fortunes, by tax law expert Julia Jirmann.

Jirmann's criticism is largely directed towards the so-called business assets regulation, which prevents taxes from being paid for the inheritance of businesses in 85 percent of cases. This regulation, she argues, contributes to the misleading nature of the figures, as it allows a significant portion of inherited wealth to go untaxed.

The state is waiving revenues of 3.4 billion euros to these individuals' benefit, as the acquirer must continue the business for at least five years to avoid paying inheritance tax on business assets. This leniency has been a subject of repeated criticism by the Federal Constitutional Court.

In 2024, revenues from inheritance tax peaked at 13.5 billion euros, up from 5.5 billion ten years prior. Yet, 45 rich individuals inherited almost 12 billion euros in 2024, with an average tax rate of around 1.5%. The specific names of these wealthy heirs are not publicly disclosed, but their low tax rates have sparked debate and calls for reform.

Federal Finance Minister Lars Klingbeil (SPD) has proposed a higher taxation of the wealthy, while the Left Party chair, Jan van Aken, suggests abolishing the need for relief review to increase revenues without raising taxes for anyone. A coalition of Network Tax Justice, Citizens' Movement for a Financial Turnaround, and the wealth organization Taxmenow demands the abolition of privileges for the wealthy in inheritance tax and has launched a campaign under the title "A Matter of Honor: Inheritance Tax - No Exceptions for Billionaires!".

The legislator intended to secure the continued existence of craft businesses and SMEs with this regulation, but the focus seems to have shifted towards the wealthy few, leaving many questioning the fairness of the current system. In the midst of this debate, a citizens' council redistributed the 25 million euro inheritance of Marlene Engelhorn to 77 initiatives, offering a glimmer of hope for a more equitable future.

Several inheritance tax proceedings are currently pending before the BVerfG, and it remains to be seen how these cases will shape the future of inheritance tax in Germany. As the debate continues, one thing is clear: the current system is under scrutiny, and change may be on the horizon.