Germany’s inheritance tax reform nears as constitutional flaws persist
Germany’s inheritance tax system faces growing pressure for reform. Legal experts and economists have long criticised the rules as unfair and unconstitutional. Now, the SPD has proposed changes to address these issues—including a 20-year payment plan for heirs.
The current system has been condemned by Germany’s Federal Constitutional Court three times—first in 1995, then in 2006, and again in 2014. Each ruling found the tax laws flawed, yet little has changed. Critics, such as tax law professor Hanno Kube and economic advisor Ulrike Malmendier, argue the rules violate constitutional principles by failing to tax wealth proportionally.
Between 30% and 50% of private wealth in Germany comes from inheritances and gifts. But the tax burden falls unevenly, with the richest families often paying lower effective rates. This undermines the principle of taxing according to ability to pay and deepens inequality.
The SPD’s plan introduces a 20-year deferral period for inheritance tax payments, easing liquidity concerns for heirs. International studies suggest fairer taxation of business assets would not harm companies. The proposal also aims to close loopholes that allow large transfers to go under-taxed.
Opposition to the reforms has been vocal, yet experts argue the criticism lacks foundation. The Constitutional Court’s repeated rulings make change inevitable, regardless of political or economic timing.
Reform of Germany’s inheritance tax now appears unavoidable. The SPD’s proposal offers a structured approach, with extended payment terms and a focus on fairness. If implemented, the changes would mark the first major overhaul since the court’s long-standing objections.
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