BERLIN – Germany’s Constitutional Court has begun deliberations over whether taxpayers should continue paying the “solidarity tax,” a levy introduced nearly three decades ago to support the economic recovery of the country’s eastern states following reunification.
The solidarity tax, implemented as part of a financial aid package after Germany’s reunification, adds a 5.5% surcharge to income taxes. Although the original solidarity pact, which facilitated financial transfers to former East Germany, ended in 2019, the tax has remained in effect.
A group of six plaintiffs, all from the liberal Free Democratic Party (FDP), filed the case in 2020, arguing that the tax is no longer constitutional as the eastern states no longer face the extraordinary financial needs the tax was intended to address. FDP parliamentary group leader Christian Duerr, one of the plaintiffs, criticized the levy as an “unnecessary economic tax” that imposes a €7 billion burden on the German economy annually.
The finance ministry reported that the tax generated €12 billion in revenue last year. If the court rules in favor of the plaintiffs, the government would be required to refund all collected solidarity tax revenues since 2019, a move that would further strain Germany’s budget amidst economic and political instability. Last week, Germany’s three-party coalition collapsed, prompting early elections and raising questions about the country’s financial direction.
Another point of contention is a decision under former Chancellor Angela Merkel’s government that exempts about 90% of taxpayers from the solidarity tax, applying it only to the highest earners. The plaintiffs argue this selective application is unconstitutional and violates the principle of equal treatment. A verdict from the Constitutional Court is anticipated in several months, leaving the future of the solidarity tax uncertain.