Merz Criticizes SPD Proposal on Inheritance Tax Amid Economic Concerns

German Chancellor Friedrich Merz has voiced strong opposition to the Social Democratic Party's (SPD) plans to overhaul the inheritance tax system, raising concerns about potential negative impacts on the country's economic stability. Speaking at a business reception in Halle, Merz emphasized the significance of small and medium-sized enterprises (SMEs) as the core of Germany's economic structure, cautioning against policy changes that could introduce uncertainty for business owners and their successors.

The SPD has advanced a proposal aiming to increase taxes on wealthy heirs. The plan suggests a new tax-free allowance of five million euros for the transfer of business assets, with taxes applied to amounts exceeding this threshold. The proposal also includes the elimination of existing relief measures and offers deferred payment options for up to 20 years to facilitate the transition for inheritors.

This initiative has encountered substantial criticism from business organizations and representatives of family-owned companies. Critics argue that the proposed threshold is insufficient to safeguard the continuity of typical mid-sized businesses, many of which could face significant financial burdens if the reforms are enacted. According to industry voices, such changes may disrupt succession plans for family enterprises and potentially threaten their long-term viability.

Chancellor Merz urged the government to refrain from introducing additional tax-related uncertainties, particularly at a time when many businesses are planning generational transitions. He advocated for a cautious approach, suggesting that any legislative changes should await the pending decision from the Federal Constitutional Court expected in 2026. Merz stressed the importance of ensuring that business succession remains manageable from a tax perspective and warned against measures that could increase the fiscal load on inheriting companies.

The SPD's initiative is part of a broader debate over wealth distribution and fiscal policy in Germany. Advocates for the reform argue that higher taxes on large inheritances are necessary to promote social equity and generate public revenue. However, business groups contend that such policies may hinder investment, job retention, and the overall competitiveness of the German economy.

Government officials are now faced with the challenge of balancing demands for greater economic fairness with the need to maintain a stable and supportive environment for SMEs. As the debate continues, many stakeholders are closely monitoring the upcoming court ruling, which could set important legal precedents for future tax policy. The outcome of these discussions is expected to have lasting implications for both Germany's business landscape and its approach to wealth taxation.