SPD's Proposed Inheritance Tax Reform Sparks Concern Over Impact on Family Businesses

The Social Democratic Party (SPD) of Germany has introduced a proposal to fundamentally reform inheritance tax, stirring significant debate and criticism from the business community, particularly family-owned enterprises. The reform includes a lifetime personal exemption of one million euros and a five million euro exemption specifically for businesses. However, these thresholds have been questioned for their adequacy in protecting medium-sized family companies during succession.

Marie-Christine Ostermann, president of the association DIE FAMILIENUNTERNEHMER, expressed serious concerns that the SPD's plans neglect the economic realities companies face amid the country’s longest economic crisis. She emphasized that a five million euro exemption is insufficient for many medium-sized businesses, as the combined value of machinery, warehouses, office buildings, and operating capital often exceeds that cap, forcing companies to risk asset liquidation, which threatens jobs and investments.

The SPD aims to simplify the inheritance tax system to protect jobs and company existence amid new Federal Constitutional Court requirements, replacing outdated thresholds that have not adjusted for over 15 years. The reform would affect around 80,000 companies, with about 55% family-owned. However, the elimination of existing exemptions for business assets could impose higher tax burdens on 44,000 larger firms, potentially leading to deteriorated investment conditions and even company relocations.

Jens Koeppen, the CDU financial policy spokesman, criticized the timing of the reform and its potential to send a negative message to entrepreneurs already facing economic difficulties. He highlighted that many in the business sector regard the proposed five million euro exemption as too low to maintain financial stability for enterprises.

Though the SPD's intention is to increase taxes on large fortunes while easing smaller inheritance burdens, leaders like Ostermann argue the approach amounts to political symbolism that fails to consider the consequences for economic stability and growth. The expansion of tax deferral options to ease immediate payment pressures is part of the plan, but concerns remain that these measures will restrict liquidity critical for investment and wage increases.

With succession challenges looming and economic uncertainty persisting, critics warn that this reform could delay investments, jeopardize jobs, and impair the long-term strength of the German economy if enacted without adjustments accounting for the operational realities of family businesses.