ALLIANCE FO§ DEMOCRACY

The 'Soli'-Lie

During the last days of July 2011, the Federal Finance Court decided whether the Solidarity Tax was still constitutional. The 'Soli', like the 5.5% supplement which every taxpayer pays in addition to income tax, capital gains tax and corporation tax, has long been the subject of criticism by the German taxpayers' association (Bund der Steuerzahler - BdSt).

The Solidarity Tax was levied from July 1991 to June 1992 at a rate of 3.75%; after a break of two years, it was reintroduced in 1995. The rate has been 5.5% since 1998. Since the Kohl government it was considered as a reconstruction aid for the GDR, and was actually the burden enacted by politics which the taxpayers (in the East and West) had to bear. By 2019, € 156 billion will have gone to the former GDR from the Solidarity Pact II; together with the Solidarity Pact I this makes a total of € 251 billion.

The Lower Saxony Finance Court in Hannover judged on 25th November 2009 that the Solidarity Tax was unconstitutional (File ref. 7 K 143/08). In its verdict the court came to the conclusion that "the accession of the former GDR in the year 1990 represented a finance requirement for the na-tional budget whose extent was not foreseeable over many years." The Lower Saxony court did not however explore to what extent this gap in finances could be made up by tax increases instead of the supplementary tax. Nor did it take into account that an increase in income tax and corporation tax could place an unnecessary burden on taxpayers and could be undesirable in terms of economic policy. After the Finance Court in Cologne found in a contrary verdict that "the Solidarity Tax was constitutional", the decision was escalated to the Federal Constitutional Court.

By 2010, the highest judges in the land had not concerned themselves with the constituionality of the Solidarity Tax. They did however refer in their decision to a decision of general principle from the year 1972, according to which a time limitation was not in the nature of the supplementary tax. They accordingly decided at the end of July 2011 that the Solidarity Tax was legal. The Solidarity Tax is a direct tax, which furnishes the state with around € 12 billion annually. The funds are however not earmarked in the budget for the former East Germany, but go into a pot which is used for many different purposes.

Like many negotiations and verdicts, this demonstrates the politicisation of jurisdiction. The decision was clearly made against the interests of the people, since according to a Forsa sur-vey, most Germans are in favour of abolition of the Solidarity Tax. 71% are of the opinion that the Solidarity Tax is no longer necessary 20 years after reunification, as shown by a survey commissioned by the magazine "Stern". Only 23% thought that the tax should continue to be levied. Most of its advocates, according to the survey, live in the former East Germany: here 44% consider that it is still necessary, while 45% would like to see it abolished. In the West, according to the survey, 18% are in favour of keeping the Solidarity Tax, with 76% against. Amongst party supporters, the Greens, at 32%, are most in favour of the state retaining the Solidarity Tax. Amongst the supporters of Left Party, the figure is 30%, for those of the SPD 23% and those of the Union 22%. Its acceptance is lowest amongst FDP voters, where only 16% think that the Solidarity Tax is still necessary.