The ‘marriage’ between Germany’s conservatives and its left-wing liberals who together have maintained control of the Bundestag since 2009 is under considerable strain.
As a result Angela Merkel finds herself between a rock and a hard place on the issue of tax reform for gay couples.
Same-Sex Marriage Still Illegal but…
Germany still does not recognise same-sex marriage but the law does make provision for same-sex unions, commonly referred to as ‘registered partnerships’. There is however no equality of tax treatment guaranteed for persons in such partnerships compared to those in heterosexual unions because according to the Constitutional Court the protection of marriage between a man and a woman is guaranteed under the German Constitution and therefore these person enjoy certain ‘inalienable’ rights whereas the rights of same-sex couples in a registered partnerships are granted at the behest of the German Parliament – the Bundestag.
At least this was the position until earlier this month when the German Constitutional Tribunal ruled that gay couples registered under the Life Partnership Act of 2001 should be granted the same tax concessions granted to married couples but only in respect of land transfer tax and public sector compensation.
The End of Tax Discrimination?
The ruling did not extend to income tax and inheritance tax discrimination which continues to be legal under German Law. For example married couples can choose to file their income tax return jointly, therefore benefiting from higher income tax thresholds. This concession is not available to registered civil partnerships.
Merkel’s problem is that while her Minister of Foreign Affairs – himself one-half of a ‘registered partnership’ since 2009 – believes that urgent tax reform is now needed to remove all areas of tax discrimination against gay couples; her Minister of Finance – a conservative member her Christian Democratic Union is in no hurry to begin such a programme of legislative change. He wants to wait until (or if) the coalition is forced to do so when the German constitutional tribunal rules on the legality of the existing regime sometime next year.
Thirteen members of the Chancellor’s right-wing party have sided with the Foreign Minster’s Free Democrats and back immediate steps for equality between heterosexual and gay couples.
Merkel is a Pragmatist!
Though as yet undecided Chancellor Merkel has some practice in putting pragmatism over ideology which is just as well because of mounting opposition in the Bundestag to her the proposed German-Austria deal to resolve the issues of undeclared money held by German residents in Swiss bank accounts.
Plans to Scuttle the German-Austrian Tax Deal.
Adopted at the end of April by the German cabinet, the accord, which has already been modified following significant concessions from Switzerland, aims to ensure the equal treatment of the wealth of German citizens, whether located in Germany or in Switzerland, and to restore tax equity for the past by means of a lump sum tax.
For more on this tax deal see : https://franhendy.com/2012/06/02/switzerland-a-secrecy-haven-too-big-to-fail/
A German Game of Tic for Tac?
Germany’s Social Democrats have, however, opposed the plans from the outset, and have threatened to veto the provisions in the Bundesrat, where the coalition no longer has a majority.
Still smarting from their defeat in 2011 to have same-sex marriages legalised in Germany it is possible that in the spirit of compromise and to ensure that her party does not further alienate their supporters who back the tax reform for same-sex couples, Angela Merkel may choose to overrule Finance Minister Wolfgang Schäuble and start comprehensive tax reform in this area.
Germany’s Upper House – the Bundesrat – is due to vote on the tax deal in the autumn so the anti-discrimination lobby may not have long to wait on the Chancellor’s decision.