Judgment of 26 March 2025 - 2 BvR 1505/20
In a judgment pronounced today, the Second Senate of the Federal Constitutional Court rejected a constitutional complaint challenging the Solidarity Surcharge Act 1995 (Solidaritätszuschlaggesetz 1995 – SolZG 1995; hereinafter: the Act) as amended by the Act to Scale Down the Solidarity Surcharge 1995 (Gesetz zur Rückführung des Solidaritätszuschlags 1995) of 10 December 2019.
The solidarity surcharge introduced with effect from 1 January 1995 constitutes a surtax within the meaning of Art. 106(1) no. 6 of the Basic Law (Grundgesetz – GG). In its judgment, the Second Senate finds that such a surtax requires the existence of additional financial needs of the Federation for specific tasks, but that the legislator only needs to outline these needs in broad terms. For the solidarity surcharge, these additional financial needs arise from German reunification. The Second Senate further holds that the legislator is required to abolish the surtax or to change its prerequisites when the additional financial needs have evidently ceased to exist. Where the legislator has imposed a surtax that is levied on a long-term basis, it is required to monitor the situation. Even today, it cannot (yet) be found that additional financial needs arising from the integration of the former East German Länder into the Federal Republic of Germany have ceased to exist. Consequently, the legislator was and is not required to abolish the solidarity surcharge from the 2020 assessment period.
The constitutional complaint, which challenges the facts that the obligation to pay the solidarity surcharge initially continued unchanged and that its scope was thereafter only scaled down in part, is therefore unsuccessful.
Justice Wallrabenstein concurs with the outcome of the decision, but filed a dissenting opinion as regards the reasons.
Facts of the case:
The solidarity surcharge, which is still levied today, was introduced with effect from 1 January 1995. It is an income and corporation surtax under Art. 106 (1) no. 6 of the Basic Law. Since 2021, only certain groups subject to income tax, and all corporations subject to corporation tax, have had to pay the solidarity surcharge. In principle, the calculated income tax or the assessed corporation tax and/or the advance payments to be made are the assessment basis for the surcharge. If income tax is collected in the form of payroll tax, it, in principle, serves as the relevant assessment basis for the solidarity surcharge. If capital gains tax is deducted at source, the solidarity surcharge is calculated on the basis of the capital gains tax incurred. The remainder of the assessment and collection of the solidarity surcharge is governed by the relevant provisions of the Income Tax Act (Einkommensteuergesetz) and the Corporation Tax Act (Körperschaftsteuergesetz).
Since 1998, the rate of the solidarity surcharge on income and corporation tax has been 5.5%.
§ 2 of the Act provides that natural persons liable for income tax under § 1 of the Income Tax Act are subject to the solidarity surcharge. Moreover, the solidarity surcharge is levied on corporations, associations and estates that are liable for corporation tax under § 1 or § 2 of the Corporation Tax Act. With regard to income tax, the legislator provided for tax exemption thresholds (Freigrenzen). If the assessment basis does not exceed these thresholds, no solidarity surcharge is payable. If it does exceed the threshold, the whole amount becomes subject to the surcharge, although it is not immediately applied in full, but rises with increasing income (so-called progression zone). The Act to Scale Down the Solidarity Surcharge 1995 of 10 December 2019 significantly raised the exemption thresholds with effect from the 2021 assessment period. However, these exemption thresholds do not apply to all assessment bases set out in § 3(1) of the Act.
With their constitutional complaint, the complainants challenge the unchanged continuation of the obligation to pay the solidarity surcharge for the 2020 assessment period and the fact that, from the 2021 assessment period onwards, the scope of the solidarity surcharge was only scaled down in part. They assert a violation of the guarantee of private property (Art. 14(1) of the Basic Law) and of the general guarantee of the right to equality (Art. 3(1) of the Basic Law) amongst others.
Key considerations of the Senate:
The constitutional complaint is admissible but unfounded.
The Act constitutes a determination of the contents and limits of the guarantee of private property that is justified.
1. When the Act to Scale Down the Solidarity Surcharge 1995 was enacted in December 2019, the federal legislator had the necessary legislative powers for the (modified) continuation of the solidarity surcharge from 2020 onwards under the constitutional provisions governing public finances. It is also not (yet) evident that the prerequisites for levying a surtax under constitutional law governing public finances have since ceased to exist.
a) The Federal Constitutional Court has not previously decided what constitutional effects arise where the federal legislator originally imposed a tax in line with its legislative powers, but, due to subsequent changes, it no longer fulfils the criteria established for this type of tax.
With regard to the relevant type of tax in the present case – the surtax – it must be assumed that the legislator is required to abolish the tax or to change its prerequisites when the prerequisites necessary for the levying of the tax are evidently no longer met. Such an obligation must be assumed to exist given that surtaxes differ from other taxes with respect to some key aspects. Surtaxes are not levied on the basis of a taxable event or a taxable object. Rather, they are levied in view of additional financial needs of the Federation for tasks vested in it. Thus, the levying of surtaxes largely depends on the actual circumstances as encountered and assessed by the legislator. If such circumstances subsequently change so significantly that the additional financial needs of the Federation, which were originally assumed to exist, have evidently ceased to exist, the criteria of the type of tax defined in Art. 106(1) no. 6 of the Basic Law are no longer met.
The legislator can claim a broad margin of appreciation and leeway when it comes to the question whether the additional financial needs of the Federation persist. However, if the legislator does not provide for a mechanism to adapt the provisions in question if the factual circumstances that provided the basis for its decision change (significantly), the Federal Constitutional Court reviews whether the provisions enacted on this basis are, when considering the changed circumstances, still covered by the legislator’s prerogative of assessment and can therefore ultimately still be justified. This is no longer the case where a provision evidently no longer reflects reality in light of changed circumstances.
In this respect, where the legislator has imposed a surtax that is levied on a long-term basis, it is required to monitor the situation. In such cases, the legislator is expected to review its original decision to impose a surtax at certain intervals to determine whether the assumptions regarding the development of the financial needs, made at the time the surtax was imposed, still reflect reality.
b) Thus, the decisive factor is which criteria shape a surtax within the meaning of Art. 106(1) no. 6 of the Basic Law and whether these were fulfilled at the time the tax law was enacted and have not evidently ceased to be fulfilled today.
Beyond the fact that surtaxes must be ancillary to income and corporation tax to a certain degree, the wording of Art. 106(1) no. 6 of the Basic Law does not provide for any further restrictions on the levying of a surtax. Nevertheless, further limits on surtaxes arise from the nature accorded to such surtaxes by the Constitution-amending legislator, from their function in the federalist order of public finances – set out in detail in the legislative materials – and from the systematic approach of constitutional law governing public finances.
aa) An unwritten criterion that is a prerequisite for a surtax is that additional financial needs of the Federation are expected, according to the legislator’s assessment, to arise from a specific task to be performed by the Federation and that the levying of a surtax appears necessary to meet these financial needs. This must be documented in the legislative process.
According to the legislative materials, the surtax set out in Art. 106(1) no. 6 of the Basic Law was created to ensure, ‘on a limited scale’, that the additional financial needs of the Federation could be met as smoothly and flexibly as possible, without calling into question the proper and stable distribution of tax revenue between the Federation and the Länder.
It follows that a surtax cannot be levied unconditionally; rather, its substantive design is shaped and limited by its objective to ensure the necessary financial flexibility of the Federation based on actual needs. The legislator amending the Constitution thus intended to be able to make use of surtaxes without the consent of the Bundesrat being necessary; it did not intend to create a possibility for surtaxes to be levied without requiring the identification of additional financial needs.
It is necessary but also sufficient that the additional financial needs arise from a specific task for a surtax to fulfil its – unchanged – purpose. The identification of such additional financial needs of the Federation for specific tasks as a prerequisite for levying a surtax protects the interests of the Länder which, for lack of a requirement of Bundesrat consent, cannot exert significant influence on the levying of surtaxes under ordinary law and do not have a comparable instrument for generating revenue. Given the generally strict separation of state funding through taxes on the one hand and decisions on the use of funds under budgetary law on the other, the legislator only needs to outline the additional financial needs relating to specific tasks in broad terms.
The link of the surtax to specific tasks also has a temporal element. The right to continue to levy the surtax is not determined by the expiry of exclusively time-related limits, such as a ‘generation span’, but only depends on whether the additional needs relating to specific tasks have evidently ceased to exist.
bb) Furthermore, a surtax may not encroach on the Basic Law’s system of financial redistribution at the expense of the Länder by eroding specific taxes or certain types of taxes whose revenue accrues solely to the Länder or jointly to the Federation and the Länder (so-called ‘prohibition on erosion’).
cc) That said, surtaxes were not designed as a subsidiary financing mechanism. The federal legislator is therefore not constitutionally required to refrain from levying a surtax even if it could instead raise income or corporation tax or raise consumption taxes accruing to the Federation, but wants to refrain from doing so because it does not appear opportune or feasible for political reasons.
dd) It is also not necessary for constitutional reasons to subject a surtax within the meaning of Art. 106(1) no. 6 of the Basic Law to a time limit from the outset. It is specifically the purpose to be fulfilled by the surtax – to serve as a flexible alternative to changes to income or corporation tax, which are taxes whose revenue accrues jointly to the Federation and the Länder, or to raising consumption taxes accruing exclusively to the Federation – that runs counter to the requirement of a time limit for the surtax.
ee) Finally, Art. 106(1) no. 6 of the Basic Law does not limit the federal legislator to levying surtaxes in an ‘emergency’ or an ‘exceptional situation’ only; it does not preclude the levying of surtaxes under ‘normal conditions regarding public finances’.
It cannot plausibly be inferred from the legislative materials that the surtax may only be levied in ‘emergencies’. No restrictions on the period during which surtaxes may be levied can be found in the legislative materials on the Fiscal Constitution Act 1955 (Finanzverfassungsgesetz 1955), nor in those on the 1969 Fiscal Reform or in the wording of Art. 106(1) no. 6 of the Basic Law. Insofar as the explanatory memorandum to the Fiscal Constitution Act 1955 refers to ‘peaks in financial needs in the federal budget that cannot be offset in other ways’, meeting such needs does not constitute an isolated objective, but is part of a list of purposes that inseparably links it to such other, closely interrelated purposes.
c) In light of the standards set out above, the Federation had the necessary legislative powers when it enacted the Act to Scale Down the Solidarity Surcharge 1995 on 10 December 2019. The federal legislator was not constitutionally required to abolish the solidarity surcharge on the grounds that it later became evident that the additional needs relating to specific tasks ceased to exist.
aa) The sliding scale of the solidarity surcharge, which was extended considerably from 2021 onwards by the Act to Scale Down the Solidarity Surcharge 1995, does not call into question the ancillary nature to income and corporation tax inherent in the surtax; the Act therefore does not fail to account for the type of tax for this reason alone.
While the legislator may not be required to provide for a sliding scale on social grounds for a surtax like the solidarity surcharge, this does not alter the fact that it is entitled to provide for such a sliding scale in light of the principle of the social state (Art. 20(1) of the Basic Law) and the different economic capabilities of income tax payers. This also applies where social aspects are not taken into consideration when the surtax is introduced – as was the case for the 1995 solidarity surcharge – but only when it is partially scaled down.
bb) It was not evident that the additional financial needs of the Federation arising from German reunification had ceased to exist when the Act to Scale Down the Solidarity Surcharge 1995 was enacted with effect from 1 January 2020. Even today, it cannot (yet) be found that the Federation no longer has additional financial needs arising from the integration of the former East German Länder into the Federal Republic of Germany, although these needs are likely lower than in the past. The Federation continues to be faced with additional financial needs arising from German reunification. This assessment is within the federal legislator’s margin for determining both a task and the additional financial needs arising therefrom. It is true that this margin has become narrower in view of the long period during which the 1995 solidarity surcharge has been levied. However, the legislator retains its margin insofar as the Federal Constitutional Court can merely review whether the task which formed the basis for the introduction of the 1995 solidarity surcharge evidently no longer gave rise to any additional financial needs of the Federation in 2020 or thereafter. This is not the case, at least not yet.
An expert opinion submitted in the present proceedings concludes that even 30 years after reunification, structural differences remain between East and West Germany, despite positive developments, and that reunification will in certain areas result in burdens on the federal budget until 2030. The data analysed in the expert opinion and the conclusions drawn by the expert third parties involved show that it cannot be assumed that additional needs of the Federation arising from reunification have evidently ceased to exist. The fact that the economists heard in the oral hearing were unable to agree on a common view also demonstrates that it is not evident that additional needs arising from reunification have ceased to exist. The response to the question of whether federal expenditure can be attributed to a specific event (in this case: reunification) at least to some extent or is possibly entirely determined by other factors can vary depending on the underlying economic theory held by the respective expert. It is not for the Federal Constitutional Court to choose between these economic theories as long as the theory on which the legislator based its decisions is not evidently erroneous.
The expiry of the so-called Solidarity Pact II at the end of 2019 is not relevant here. It merely ended the specific structures of federal support for the East German Länder that had existed up to that point. Yet this does not mean that the Federation – as it sufficiently set out in the present proceedings – does not, after this point, have to provide funding for needs of the East German Länder arising from reunification in the interest of the whole state, namely to establish equal living conditions to the greatest possible extent.
2. The Act in the version relevant here also does not violate the guarantee of private property. It satisfies the substantive requirements applicable to a determination of the contents and limits of property.
a) It has not been submitted, nor is it otherwise ascertainable, that the solidarity surcharge, which amounts to 5.5% of the income or corporation tax, constitutes excessive taxation that would no longer be compatible with a constitutional limit on reasonable taxation and would therefore violate the general principle of proportionality. This applies both for the year 2020, in which the surcharge was generally levied on all income and corporation tax payers, with a few exceptions, and for the period from 2021 onwards, in which only higher income groups have been subject to the surtax on income tax.
It is also not presently evident that the 5.5% rate of the surtax is disproportionate to the level of additional funding needed for the tasks to be covered by the solidarity surcharge. It is true that revenue of EUR 18.7 billion was generated by the solidarity surcharge in 2020, while the disproportionate burdens on the federal budget in the years from 2020 onwards that can be attributed at least in part to reunification merely amounted to approximately EUR 13 billion. However, the federal legislator reacted to these developments, in line with its constitutional obligation to monitor the situation, through the Act to Scale Down the Solidarity Surcharge 1995, by no longer levying the solidarity surcharge on all income tax payers, thus considerably reducing the revenue generated by the solidarity surcharge from 2021 onwards. In 2021, the solidarity surcharge only generated revenue of EUR 11 billion.
b) The Act also does not violate Art. 3(1) of the Basic Law.
With regard to the social sliding scale of the surtax, there is no need to decide whether unequal treatment affecting fundamental rights could result from the fact that the legislator makes use of exemption thresholds (mitigated by a progression zone) rather than using allowances (Freibeträge), which would provide relief to all taxpayers, and/or that the legislator did not opt to equally burden all taxpayers. Such unequal treatment would in any case be justified.
Insofar as the exemption thresholds under § 3(3) first sentence of the Act are generally only applicable to assessed income tax and payroll tax, and not to capital gains tax deducted at source, these are not essentially comparable situations. This also holds true insofar as the exemption thresholds applicable from 2021 onwards only apply to income tax and not to corporation tax. These are likewise not essentially comparable situations.
Dissenting opinion of Justice Wallrabenstein
I consider the standards developed by the Senate majority and the right to review whether the financial needs set forth by the legislator (continue to) exist devised on the basis of these standards to be misguided. Although the Senate exercises restraint with regard to this review, the new obligation to identify additional needs and the obligation to monitor the situation complicate the levying of surtaxes. This creates constitutional uncertainty.
When determining the constitutional framework for the tax legislator on the basis of Art. 14 of the Basic Law, its two poles are private benefit and social responsibility. The protection from tax burdens afforded by Art. 14(1) first sentence of the Basic Law is also shaped by Art. 14(2) of the Basic Law. It is precisely in light of the Basic Law’s decision in favour of private property that taxes are the essential instrument for regular corrections of the development of property that requires redistribution in a way that safeguards freedom in the long run.
By linking surtaxes to substantive requirements, the Senate majority one-sidedly curtails this legislative leeway. Thus, the Bundestag is no longer just democratically accountable to the public for its budgetary decisions. It is now additionally accountable to those whose property is subject to a surtax. This extension of the status of the holders of property which grants them a right to scrutinise state expenditure is not compatible with Art. 14(1) and (2) of the Basic Law.
In addition, the Senate makes surtaxes subject to a risk of cassation, which in this form has previously been unknown in tax law. The Senate wants to decide whether the additional needs relating to specific tasks that must be identified by the Bundestag to justify a surtax do actually exist, whether they exist in the amount of the tax revenue generated by the surtax and whether they have not evidently ceased to exist either. This shows the Senate’s willingness to encroach on fiscal policy. This runs counter to my fundamental understanding of the limits to the jurisdiction of the Federal Constitutional Court following from the principles of democracy and the separation of powers.