The Karlsruhe-based Federal Constitutional Court will rule on the benefit after the country’s highest tax court said the exemption unfairly privileges family companies over individuals transferring non-business assets. The tax court also said the current rules allow too many tricks to get tax breaks without preserving jobs.

Essentially, someone owning a business can transfer assets worth billions of euros tax free, while the heirs of an investor passing on a few million euros in stock pay an estate tax of as much as 17 percent, according to Roman Seer, a law professor at the Ruhr University Bochum.

“The level of exemption is out of proportion,´´ said Seer. ‘‘Everybody expects the court to rescind the rules.´´

Government Action

With so much at stake, Chancellor Angela Merkel’s Christian Democrats are promising to take action if necessary. Finance Minister Wolfgang Schaeuble told magazine Der Spiegel in an article published over the weekend that he’ll introduce new discounts to spare family-owned companies from a higher tax burden should the court strike down the current law. The Finance Ministry declined yesterday to comment on what Schaeuble intends to do.

‘‘We will make sure that our German Mittelstand will create jobs and won’t have to pay estate tax,´´ Volker Kauder, the CDU’s parliamentary caucus leader, said during a speech in Cologne last week.

The easiest solution to protect German business and treat everyone equally might be to completely abolish the inheritance tax, which brings in about 5 billion euros ($6.22 billion) to government coffers annually, Seer said.

‘‘Its revenue is rather limited,’’ he said. ‘‘The costs associated with collecting it, on the other, are high.’’
 

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