The Treasury Department is urging the Constitutional Court due to elevated interest rates affecting taxpayers.
When folks contest a tax evaluation and opt for legal recourse, they generally need to shell out the disputed taxes priorly. However, once an application is submitted, a tax court may put a hold on the tax assessment's implementation. If the taxpayer eventually loses in the principal hearing, they're liable to pay a 0.5% "holding fee" per month as interest on the suspended amount, equivalent to an annual interest rate of six percent.
This particular tale revolves around €23,950 in taxes and solidarity levy for the year 2012, which was challenged. The Finance Court of Münster temporarily halted the collection process to this extent. The lawsuit dragged on for six and a half years, concluding with the complainant's defeat. Consequently, they were compelled to fork out suspension interest for 78 months, equivalent to €8,814.
The taxpayer then filed another lawsuit, opposing the suspension interest. The rationale behind this was a 2021 judgment by the Federal Constitutional Court, which regarded the proportion of interest on tax dues as "unrealistic" at 0.5% per month or 6% per year. Subsequently, the late payment interest was decreased retroactively from the tax year 2019 to 0.15% per month, or 1.8% per year.
Now, the German Federal Finance Court (BFH) asserts that the suspension interest, especially during the prolonged era of low-interest rates, was excessively high. Furthermore, there's been an inconsistency in comparison to late payment interest since 2019. "This interest rate differential is also unjustifiable under constitutional law," reiterated the top financial jurists. Consequently, they forwarded the dispute to the Federal Constitutional Court for review.
Despite the taxpayer losing the primary hearing, they had to pay a significant amount as interest on the suspended taxes due to the high interest rate of 0.5% per month. However, following a 2021 ruling by the Federal Constitutional Court, the late payment interest was reduced retroactively to 0.15% per month, showing a significant decrease in the interest rate.
