It is done! The Bundesrat, the second chamber of the German Parliament, has passed the reform of the inheritance tax, as Financial Times Germany reported in its 5 December issue.

The Bundesrat thereby followed the Parliament’s first chamber, the Bundestag, which passed the bill at the end of November. The Grand Coalition had come under pressure to get the bill passed in 2008 due to a Constitutional Court’s decision which declared the former rules on
inheritance tax unlawful and no longer applicable starting in 2009. The annual revenue from inheritance tax amounts to EUR 4 billion (approx. USD 5 billion) which could not have been collected in 2009 if the reform had not passed both chambers of Parliament by the end of this year, at least not until other legislation had been approved .

The bill must now be signed by President Horst Köhler who could veto the bill. Several legal experts have asked President Köhler not to sign the bill, claiming that it is constitutionality doubtful. Joachim Lang, a tax expert from Cologne, told the German Business Weekly Wirtschaftswoche in its 6 December 2008 issue, that he had never seen a bill as obviously unconstitutional as this one. Experts particularly criticize the obligation to retain inherited land and family-run businesses for a period of seven or ten years in order to take advantage of a tax exemption.

Wolfgang Bosbach, vice president of the governing Christian Democrats faction in the German Parliament voted against the bill and Hermann-Ulrich Viskorf, vice president of the German Federal Fiscal Court and a former judge at the Federal Constitutional Court, told Wirtschaftswoche that he also considers the bill to be unconstitutional. President Köhler is currently considering whether to sign the bill or whether to use his veto right.