Reports indicate that structural financial needs between East and West Germany persist, with annual requirements estimated at 11 to 12 billion euros for the federal budget.

The Federal Constitutional Court is poised to rule on the future of the solidarity surcharge (Soli), which has been in place for 35 years since German reunification, potentially impacting government revenues.

Additionally, the government maintains that costs related to reunification, particularly in pensions and labor markets, justify the continued imposition of the Soli.

While the SPD and Green parties advocate for retaining the surcharge for wealthier individuals, the CDU/CSU coalition supports its abolition, reflecting a significant divide in tax policy.

Originally intended as a temporary measure to finance reunification, the Soli currently imposes a 5.5% surcharge on income and corporate taxes, generating over 12 billion euros annually.

Critics, including FDP representatives, argue that the Soli's continued existence is unjustified, as its original purpose has lapsed, leading to unequal treatment among taxpayers.

This legal challenge was initiated in 2020 by six Free Democratic Party (FDP) politicians, who argue that the surcharge violates property rights, especially after the second Solidarity Pact ended in 2019.

The court's decision will also determine whether the government must refund approximately 65 billion euros collected from the surcharge since 2020.

The government defends the Soli by citing ongoing financial disparities between eastern and western states, arguing that the funds are necessary for local investments.

Despite the court's ruling favoring the government's position, there are strong calls for reforming the solidarity surcharge to ensure fairness in the tax system.

Reforming the income tax system is seen as essential to restoring fairness, potentially requiring adjustments to the top tax rate, which historically reached as high as 53 percent.

The court emphasized that the Soli should not be imposed indefinitely and that the government must regularly assess the financial burdens related to reunification.