Elderly Individuals Lodge a Constitutional Lawsuit on Our Online Platform
In a recent development, Germany's highest tax court, the BFH, has ruled on the issue of double taxation of pensions, sparking controversy over two different methods used for calculating and mitigating this issue. The methods in question are the Braun/Schindler formula and the federal government’s duration-oriented method.
The Braun/Schindler formula, developed by financial mathematician Klaus Schindler from Saarbrücken and tax advisor Heinrich Braun from Mannheim, compares the taxed and tax-free portions of contributions with the respective portions in the pension phase. On the other hand, the federal government uses the duration-oriented method, which considers the total sums of contributions and pension benefits and ensures that the sum of contributions paid by a pensioner during his working life from his taxable income is not higher than the sum of tax-free benefits he receives in old age.
The BFH's ruling has highlighted the increased likelihood of illegal double taxation for later pension cohorts as the tax-free portion of the pension decreases continuously to zero by 2040. This decision has led to two specific pensioners filing a constitutional complaint in Karlsruhe, arguing that the federal government's method disadvantages married couples and uses mortality tables that reflect the statistical life expectancy after retirement, which disadvantages men since the average life expectancy of men is lower than that of women, while the tax allowances for both sexes are the same.
Reiner Holznagel, president of the Federal Association of Taxpayers (BdSt), has stated that they are supporting one of the two complaint procedures as a model case. The BdSt is also criticizing the federal government's calculation method for its disadvantages to married couples and its use of mortality tables that reflect the statistical life expectancy after retirement.
The constitutional complaint filed by the two pensioners is currently being reviewed, and the Federal Constitutional Court is examining whether it will accept the complaints regarding the double taxation of pensions for married couples. The outcome of these cases could potentially lead to a shift in Germany's pension taxation methods.
Without specific details on these methods in the available search results, it's challenging to provide a comprehensive comparison. However, potential areas of difference between the two methods include calculative approach, tax fairness, implementation and administration, and complexity. For a detailed analysis, consulting German tax legislation or academic studies on pension taxation would be necessary.
The Braun/Schindler formula and the federal government's duration-oriented method, both used for calculating and mitigating double taxation of pensions, are being challenged in light of retirement finance and business matters. The constitutional complaint filed by two pensioners argues that the federal government's method is disadvantageous to married couples and uses mortality tables that reflect the statistical life expectancy after retirement, which may lead to unfair taxation compared to the Braun/Schindler formula.
