Draft:Bindingsteuer

The Bindingsteuer, i.e.: “§20 Abs. 6 Satz 5 EStG” (“Income Tax Law Section 20, Paragraph 6, Sentence 5”), is a tax in Germany introduced by the Social Democratic Party (SPD), with Olaf Scholz as Finance Minister, first in December 2019 and finally with minimal cosmetic changes in December 2020, before it finally went into effect on January 1st, 2021.:

It literally means the “Tax of (Lothar) Binding”.

It is regarded as unconstitutional by multiple sources in the professional literature, with a first decision in the Rhineland-Palatinate Finance Court in December 2023, already doubting its constitutionality.

Origin of the Name

It is named after Lothar Binding, a retired SPD politician, Member of Parliament in 2019, who oversaw the formulation of the law as the SPD “Obmann” (Chairman) in the parliamentary Finance Committee

He is regarded as the father and intellectual author of the tax for his fierce public defense and mocking of the affected taxpayers. See below: “Naming and Intellectual Author”.

Bindingsteuer Restrictions

The legal text of “§20 Abs. 6 Satz 5 EStG” introduces explicitly the following restrictions:

• Losses in trading with derivatives can only be offset against winnings up to a maximum of 20,000 EUR.
• Losses can be carried forward to the following years, but up to a maximum of 20,000 EUR per year.
• Losses from trading with derivatives can only be offset against winnings from trading with derivatives.

The affected set of derivatives was defined by the Federal_Ministry_of_Finance_(Germany) in a circular on June 3rd, 2021, shockingly six months after the law had gone into effect.

And even more shockingly, the circular categorized open exchange Futures, Options and CFDs as derivatives for the application of the Bindingsteuer, but excluded privately issued Certificates and Warrants, where the price evolution is controlled by a proprietary algorithm controlled by the private issuer.

See below the details of the Finance Court Rhineland-Palatinate - Decision, which exposes of a Tax Assessment Report (Steuerbescheid) and with it the application of the law as laid out above.

Taxation Effects

The following features of the Bindingsteuer were already identified in October 2020 by the Bundesrat (Federal Council), requesting in it the deletion of the law paragraphs which enacted the Bindingsteuer in December 2019. For all details, see the specific section: “Bundesrat Recommendations 503/1/20.”

The effects:

• Unlimited taxing
• Taxes on Losses (also unlimited)
• Unrecoverable growing carry-forward losses.
• Protection of shares portfolios with derivatives is forbidden.
• Tax-induced private bankruptcy

Tax-induced private bankruptcy is possible because tax rates over 100% do directly tax private assets, and being the tax rate unlimited, private assets will be tax with no limits. See also Public Case Infinite Tax Rate

Because of the, unlimited, direct taxing of private assets the overall effect has also been deemed as “expropriation”.

Goal of the Bindingsteuer

The first draft of the Bindingsteuer appeared in the brief minutes of the public hearing conducted on Nov 11th 2019 (See Enactment of the Bindingsteuer) on pages 24 and 25. The justification for “§20 Abs. 6 Satz 5” is formulated as follows.

Termingeschäfte sind durch ihre begrenzte Laufzeit und durch Hebeleffekte in wesentlichem Umfang spekulativ. Es können einerseits hohe Gewinne und andererseits der Totalverlust der Anlage eintreten. Diese Effekte treten bei anderen Kapitalanlagen nicht in vergleichbarem Ausmaß auf. Verluste aus Termingeschäften werden deshalb in einem besonderen Verlustverrechnungskreis berücksichtigt, um das Investitionsvolumen und die daraus für Anleger entstehenden Verlustrisiken aus diesen spekulativen Anlagen zu begrenzen. Die Berücksichtigung der Verluste wird nicht generell versagt. Die Verlustnutzung wird zeitlich gestreckt und die Verluste veranlagungsübergreifend berücksichtigt.

—- (Translation) —-
Derivatives transactions are speculative to a significant extent due to their limited term and leverage effects. On one hand, high profits can occur, while on the other hand, the total loss of the investment can occur. These effects do not occur to a comparable extent with other capital investments. Losses from derivatives transactions are therefore taken into account in a special loss offset circle in order to limit the investment volume and the resulting loss risks for investors from these speculative investments. The consideration of losses is not generally denied. The use of losses is staggered over time and the losses are taken into account across tax assessments.

Summarized:

• Reduce speculation
• Stretch losses over time
• Protect Investors by reducing trading volume

The first two points were directly categorized as wrong and not achieved by the Bundesrat Recommendations 501/3/20.

The third and final goal was addressed by Lothar Binding, who stated exactly what that meant, nothing less but an effective “prohibition”, which obviously reduces the trading volume. Here is the final statement in the interview in the “Der Zertifikateberater” in March 2020 (See “Naming and Intellectual Author”).

Nein. Die Idee ist es, solche risikobehafteten Geschäfte im privaten Bereich nicht steuerlich zu fördern. Wenn private Anleger sich in Zukunft zweimal überlegen, ob sie an der Terminbörse riskante Wetten eingehen wollen, und wenn wir dazu beigetragen haben, dass sie davon Abstand nehmen, dann haben wir unser Ziel erreicht.

—- (Translation) —-
No. The idea is not to promote such risky transactions in the private sector from a tax perspective. If private investors in the future think twice about engaging in risky bets on the derivatives market, and if we contribute for them to refrain from doing so, then we have achieved our goal.

Investors will “think twice”, and therefore “refrain from”, if they have been personally affected by the effects of the law or if they have seen other being affected, where private assets will have been taxed, leading to severe personal damage, also “refraining from”.

Finance Court Rhineland-Palatinate - Decision 1-V-1674/23

Published on Dec 5th, 2023 with the following title:

Aussetzung der Vollziehung: Verfassungsmäßigkeit der Verlustverrechnungsbeschränkung bei Termingeschäften zweifelhaft

—- (Translation) —-
Suspension of enforcement: Constitutionality of the loss offset restriction for derivatives transactions doubtful

The affected taxpayers, a couple, had posted a net profit trading with CFDs of 23,342 EUR and the taxes to be paid for capital gains amounted to 59,860 EUR. A quick calculation shows that the applied tax rate was 256% (59,860 / 23,342 * 100), although this takes into account all items applied and not only the effects of the Bindingstuer (see below for a detailed calculation which yields 247% discarding the non-Bindingsteuer effects)

For the calculation of the capital gains, the following figures were used by the taxpayers and filed in the Income Tax Statement (From the Court Decision, “Facts: Paragraph 3”):

• CFD Winnings: 250,631 EUR
• CFD Losses: 227,289 EUR

As seen in the court decision, “Facts: Paragraph 6”, in row 2 of the table that the Finanzamt (Tax Office) provided with the Steuerbescheid (Tax Assessment Report) the application of “§20 Abs. 6 Satz 5” limited the losses to 20,000 EUR.

Winnings from Derivatives	250,631
Offsetting of current losses from derivatives trading i.S.d. § 20 Abs. 6 Satz 5 EStG	20,000
Offsetting of loss carryforwards from capital assets without losses from the sale of shares	15,203
minus Saver’s allowance	1,602
Income from capital assets	213,826

This created a fake virtual net profit of: 250,631 - 20,000 = 230,631 EUR, the Binding-Net-Profit.

To distinguish it from the actual real net profit and following the popular naming of the tax, this fake virtual profit is named as “Biding-Net-Profit”. With the same prefix applied to the tax rate and other affected concepts.

Recalling that the official tax rate for capital gains in Germany is 25% and discarding the other items in the table and not considering marginal effects (below 2% in total) of the “Solidarity Surcharge” tax (Solidaritätszuschlag) and religious confession, the tax rate directly attributable to the Bindingsteuer, i.e.: the Binding-Tax-Rate can be calculated easily:

Binding-Tax-Rate = 25% * (Binding-Net-Profit / Net Profit)
Binding-Tax-Rate = 25% * (230.631 / 23.342)
Binding-Tax-Rate = 25% * (9,88)
Binding-Tax-Rate = 247%

Being 247% the tax rate directly attributable to the application of the Bindingsteuer. To add to the injury, the aforementioned *Solidarity Surcharge” and religious confession amounts, will be calulated using this 247% and not the official 25%.

The decision of the Finance Court grants an AdV or “Aussetzung der Vollziehung” (“Suspension of Execution”) to the affected taxpayers, which means that the tax payment must not be executed. Payment which would only have to be executed if the Finance Court (or a higher instance) finally rules against the couple.

The Tax Office (“Finanzamt”) decided not to wait for a final decision and filed an appeal in the Federal Fiscal Court (Bundesfinanzhof) with reference: “BFH VIII B 113/23” in order to grant the execution of the payment.

Several media outlets, including the Frankfurter Allgemeine and Handelsblatt reported on this case and the its progress into the Federal Fiscal Court (BFH).

The Frankfurter Allgemeine additionally published an opinion article, on this case with a strong criticism with regards to how lawmaking was being done in Germany and how democracy is apparently no longer a thing in parliament, and has therefore to be guarded by the Federal Constitutional Court (“Bundesverfassungsgericht”)

Public Case - Infinite Tax Rate and Tax-Induced Private Bankruptcy

Prof. Dr. jur. Christopher Juhn, a well-known tax advisor in Germany made public the case of one of his clients, named “Max” in a Youtube video.

The cover frame of the video summarizes the case:

Winnings: 15,000,000 EUR
Losses: 15,000,000 EUR
Net-Profit: 0 EUR

Binding-Tax-Amount: 4,000,000 EUR

As “Max” explains in the video, he is now one step away from tax-induced “Private Bankruptcy”.

Although one has to understand the figures published by Prof. Dr. jur. Juhn as rounded values, it serves as a perfect example of the unlimited nature of the tax rate that the Bindingsteuer generates:

Binding-Tax-Rate = Binding-Tax-Amount / Net Profit
Binding-Tax-Rate = 4,000,000 / 0
Binding-Tax-Rate = Infinite

Tax-Induced Private Bankruptcy

Dr. jur. Sascha Besau, from Juhn’s law office, additionally commented on the case in a an extensive article titled: “Principle of proportionality in tax law” (German: “Verhältnismäßigkeitsgrundsatz im Steuerrecht”) Specifically referring to the case cited above and the Bindingsteuer talks about tax-induced private bankruptcy. The specific paragraph says:

Ein weiteres Beispiel, wo im deutschen Steuerrecht der Verhältnismäßigkeitsgrundsatz derzeit möglicherweise verletzt wird, ist die Sonderregelung, die die Beschränkung der Verlustverrechnung bei Termingeschäften vorschreibt. Hier geht es sogar soweit, dass Privatinsolvenzen drohen oder sogar eintreten. Selbst dann, wenn in diesem Zusammenhang die Lenkungswirkung bei der Intention des Gesetzgebers im Vordergrund stand, ist es bei derart gravierenden Einschnitten für die Betroffenen mehr als fraglich, ob hier der Verhältnismäßigkeitsgrundsatz ausreichende Beachtung findet.

—- (Translation) —-
Another example where the principle of proportionality in German tax law may currently be violated is the special regulation that prescribes the restriction of offsetting losses in derivatives trading. This even goes so far as to threaten or even lead to personal bankruptcies. Even if the legislator’s intention to have a steering effect was the primary focus in this context, it is more than questionable whether the principle of proportionality receives sufficient consideration in such significant interventions for those affected.

Taxes on Losses

The public cases shown above show examples of taxing for a winning year and for a neutral year, but the Bundesrat Recommendations 501/3/20 also identified that the Bindingsteuer would tax losses too. It is easy to see how this works, thanks to the 20,000 EUR limit in loss offsetting. An example from bindingsteuer.de for a losing year.

Winnings: 500,000 EUR
Losses: 550,000 EUR

Net Profit = Winnings - Losses
Net Profit = 500,000 - 550,000 = -50,000 EUR

I.e. a net loss (negative net profit) has been posted. During the Tax Assessment and as seen above in the RLP Court Decision, the actual “Losses” will be replaced by the 20,000 EUR Binding-Offset-Limit.

# Bindingsteuer Magic
Binding-Net-Profit = Winnings - Binding-Offset-Limit
Binding-Net-Profit = 500,000 - 20,000 = 480,000 EUR

And the fake virtual net profit will be taxed with the legal 25% for capital gains, generating an effective tax rate well above that figure.

Binding-Tax-Amount = Binding-Net-Profit * 25%
Binding-Tax-Amount = 480000 * 25% = 120,000 EUR

Binding-Tax-Rate = Binding-Tax-Amount / Net Profit
Binding-Tax-Rate = 120,000 / -50,000 = -240%

The “negative” tax rate does not indicate the taxpayer is getting money back. It is simply a mathematical artifact that shows that the Binding-Tax-Aount will be fully paid using private assets, because there was no net profit.

Political Status

Since the introduction of the Bindingsteuer, only SPD Members of Parliament have positioned themselves in favor of the law and have defended its constitutionality and in 2024, the only party still supporting the Bindingsteuer and defending its constitutionality is the SPD, the same that introduced the law.

SPD

Lothar Binding’s successor as SPD “Obmann” (Chairman) in the Finance Committee in parliament, Michael Schrodi, made a last public statement on “abgeordnetenwatch.de” in July 2023 when answering a question specifically about the Bindingsteuer posted by an affected taxpayer.

Wir halten die geltende Regelung für verfassungskonform und für sehr wohl an den Interessen der Allgemeinheit ausgerichtet.

—- (Translation) —-
We consider the current regulation to be in line with the constitution and well-aligned with the interests of the general public.

FDP

The party is since 2021 in the Government and in charge of the Federal Ministry of Finance. Florian Toncar, currently Secretary of State, opposed the Bindingsteuer in the Finance Committee in 2019 and in the same “Der Zertifikateberate” issue, March 2020, expressed its doubts about the consitutitionality of the Bindingsteuer.

In the “Future Financing Act” (“Zukunftfinanzierungsgesetzt”), the FDP proposed in the initial paper the elimination of the Bindingsteuer. But this proposal was removed in later drafts. Florian Toncar gave a public explanation as to why in an answer on abgeordnetenwatch.de

“Aufgrund des Widerspruchs aus anderen Ministerien findet sich diese Maßnahme aber zunächst nicht im Gesetzentwurf.”

—- (Translation) —-
“However, due to opposition from other ministries, this measure is not initially included in the draft law.”

Given that the SPD holds no current positions in Ministries related to economy, taxing or lawmaking (justice), and that Olaf Schold, Finance Minister who signed off the Bindingsteuer in 2019, is the Chancellor, it is speculated in the forums that Scholz himself is the one who vetoed the deletion of the Bindingsteuer.

Up to this day (March 2024), Florian Toncar does still answer the questions of taxpayers on abgeordnetenwatch.de, stating that the FDP is still working with the coalition partners to remove the Bindingsteuer

CDU/CSU

Originally the CDU/CSU co-voted the introduction of the Bindingsteuer, albeit leaving a note in the Finance Committee documentation, as to how difficult was it for the party to give this to the SPD

On Page 38 of the Finance Committee - Recommendation and Resolution Report - 19/15876 (See Chronology of the Formulation)

Schließlich machte die Fraktion der CDU/CSU darauf aufmerksam, dass der Änderungsantrag Nr. 11 der Koalitionsfraktionen, der in § 20 Absatz 6 EStG eine Beschränkung der Verlustverrechnung bei Einkünften aus Termingeschäften und aus dem Ausfall von Kapitalanlagen im Privatvermögen vorsehe, ein Kompromiss zwischen den Koalitionsfraktionen gewesen sei. Der Kompromiss sei aus Sicht der Fraktion der CDU/CSU schwierig gewesen. Es handle sich um ein schwieriges und komplexes Thema, da beispielsweise unterschiedliche Verluste

—- (Translation) —-
Finally, the CDU/CSU faction pointed out that amendment No. 11 of the coalition factions, which envisages a limitation on the offsetting of losses in income from futures trading and from the failure of capital investments in private assets in § 20 (6) of the Income Tax Act, had been a compromise between the coalition factions. The compromise had been difficult from the perspective of the CDU/CSU faction. It was a difficult and complex issue, as, for example, different types of losses

The CDU/CSU has moved on and is now requesting the removal. The latest attempt was in November 2023, when it filed a request withing the scope of the “Future Financing Act”, to amend the Income Tax Law to delete “§ 20 Abs. 6 Satz 5 / Satz 6 EStG”.

The amendment was rejected.

Literature

So far, two books discuss the topic.

Die Besteuerung der Kapitaleinkünfte - February 2024

(“The Taxation of Capital Gains”)

Written by by Prof. Dr. Monika Jachmann-Michel, Presiding Judge of the VIII. Senate, responsible for capital assets, at the Federal Fiscal Court (BFH).

Published and sold by Boorberg and also available on Amazon.

The table of contents can be freely read and Part B, Section V.3 is titled: “Limitation of loss utilization (“Verlustverrechnungsbeschränkung”) and has a special entry for the Bindingsteuer:

b) Sonstige (§ 20 Abs. 6 Sätze 5 und 6 EStG)
   bb) Grundlegende Bedenken

—- Translation —-

b) Various (§ 20 Abs. 6 Sätze 5 und 6 EStG)
  bb) Fundamental Concerns (*"Grundlegende Bedenken"*)

Summarized: a Presiding Judge for capital assets in the Federal Fiscal Court, has put down in black on white that she has “fundamental concerns” about the Bindingsteuer.

Bindingsteuer Demokratische Republik

Subtitle: “How the SPD is (probably) striving for the DDR 2.0”

Available on Amazon in English and German.

Quoting the back cover from the Amazon books presentation:

A clearly unconstitutional law, was introduced in 2019 by the SPD. This book explores the capital expropriating and punishing features of that law, how democracy was abused to have it passed, the judicial system too, to keep it alive, and if beyond hatred and/or incompetence, ulterior obscure motives are a possibility: for example, a master long term plan to impose a utopic social-communist paradise.

In December 2023 the first court decision called out the unconstitutionality of the law. But the way is long before an obscure future can be avoided.

Websites & Forums

An informational website “bindingsteuer.de” exists, which documents everything related to the Bindingsteuer, its history and all politicians related to it.

The two most active forums where the topic is discussed since the beginning of 2020 are

• Trading-Stocks.de
• Wallstreet-Online.de

Enactment of the Bindingsteuer

Back Door Introduction

The modifications to the Income Tax Law were discussed and approved in the proceedings of this other law.

Gesetz zur Einführung einer Pflicht zur Mitteilung grenzüberschreitender Steuergestaltungen

—- (Translation) —-
Law on the introduction of an obligation to disclose cross-border tax arrangements

Chronology of the Formulation

2019-11-04 - 1st reading in the plenary

The government draft had no traces of the Bindingsteuer

2019-11-11 - Brief minutes of a public hearing on the law

A first draft of the Bindingsteuer is present and declares its goals

2019-12-11 - A second draft contains the Bindingsteuer law changes

It is presented as amendment 11. During the public hearing it was number 1.

2019-12-12 - One day later - 2nd and 3rd readings in the plenary

And it is approved. It was an all or none voting.

December 2019 - First Publication

Income Tax Law - Introduction in 2019

On Dec 21st, 2019, the Bindingsteuer was made official, albeit with a loss-offsetting limit of 10,000 EUR.

Bundesrat Recommendations 503/1/20

In its recommendations 503/1/20, deletion of the Bindingsteuer was requested on page 19

b) Nummer 5 ist wie folgt zu fassen:
  "5. § 20 wird wie folgt geändert:
    "a) Absatz 4a Satz 5 wird wie folgt gefasst:
     b) In Absatz 6 werden die Sätze 5 und 6 gestrichen.

—- (Translation) —-

b) Number 5 is to be formulated as follows:
  "5. Section 20 is amended as follows:
    "a) Paragraph 4a sentence 5 is to be formulated as follows:
    b) Sentences 5 and 6 to be deleted in paragraph 6.

The Bundesrat continued with a bashing on pages 21 and 22 in which it identified:

• Infinite taxing.
• Taxing of losses.
• Unrecoverable losses which grow every year.
• Breach of the principle of taxing of net income.
• Disregard of existing sentences from the highest courts.
• Prohibition of insurance of shares of Portfolios
• Not an instrument against market speculation, which was one of the reasons used to sustain the introduction of the law.

Here are the paragraphs in question. First page 21:

Mit der Neuausrichtung der Besteuerung ab dem Jahr 2009 wurde – höchstrichterlich bestätigt – das Grundprinzip einer symmetrischen Berücksichtigung von Gewinnen und Verlusten innerhalb der Kapitaleinkünfte eingeführt. Die neuen Vorschriften brechen mit diesem Grundprinzip. Die Verlustverrechnungsbeschränkungen sind so restriktiv, dass sie in der Fachliteratur als ein klarer Verstoß gegen das verfassungsrechtlich maßgebende Nettoprinzip bewertet werden.

—- (Translation) —-
With the realignment of taxation starting from 2009, the fundamental principle of symmetric consideration of gains and losses within capital income was introduced, as confirmed by the highest courts. The new regulations break with this fundamental principle. The restrictions on loss offsetting are so restrictive that they are considered in professional literature as a clear violation of the constitutionally relevant principle of net income.

The first part on page 22.

- Faktisches Verlustverrechnungsverbot innerhalb der Termingeschäfte

Bei Termingeschäften müssen Anleger Gewinne unbegrenzt versteuern, ohne die Verluste aus ebendiesen Geschäften jenseits der 10 000 Euro-Schwelle gegenrechnen zu dürfen. Dies führt zu einer Steuer auf Verluste, deren Ausmaß von Jahr zu Jahr wächst.
—- (Translation) —-
- Factual prohibition on offsetting losses within derivatives trading
In futures trading, investors are required to pay taxes on profits indefinitely, without being allowed to offset losses from the same transactions beyond the 10,000 euro threshold. This results in a taxation of losses, the extent of which grows from year to year.

The final part on page 22

- Kein Instrument gegen Kapitalmarktspekulation

Die Neuregelung versagt auch als Instrument zur Eindämmung von Kapitalmarktspekulation. Denn „echte“ Spekulation findet meist im Zuge einer gewerblichen Tätigkeit statt und hier gelten die Beschränkungen nicht. Ohnehin ist es nicht sachgerecht, Verluste aus Termingeschäften mit „schädlicher Spekulation“ gleichzusetzen. Viele Anleger nutzen Termingeschäfte insbesondere als defensives Instrument zur Absicherung gegenläufiger Positionen. Erlittene Verluste sind dann Versicherungsprämien, die bei großen Depots durchaus beträchtlich ausfallen können. Solche vorsichtigen Anleger leisten gerade in volatilen Märkten einen Beitrag zur Stabilität
—- (Translation) —-
- No instrument against capital market speculation
The new regulation also fails as and instrument to curb capital market speculation. Because “real” speculation mostly occurs in the course of commercial activity, and the restrictions do not apply here. Moreover, it is not appropriate to equate losses from futures trading with “harmful speculation”. Many investors use futures trading specifically as a defensive instrument to hedge against opposing positions. Incurred losses then serve as insurance premiums, which can be quite considerable for large portfolios. Such cautious investors contribute to stability, especially in volatile markets.

The Bundesrat is simply ignored

On Oct 21, 2020 in the Printout 19/23551 for the Annual Tax Act, everything reported by the Bunderat is acknowledged, including the deletion request, on pages 12 and 13 and it is simply ignored.

December 2020 - Final Form of the Law

Income Tax Law - Cosmetic Changes in December 2020 - 10,000 EUR to 20,000 EUR

Although not registered in the previous session, a reaction existed, which did not change the nature of the law at all, because the initial loss-offsetting limit was raised on Dec 29th, 2021 from 10,000 EUR to 20,000 EUR.

Naming and Intellectual Author

The tax is named after Lothar Binding, retired Member of Parliament, SPD Finance Speaker and SPD leader in the Finance Committee in Parliament as the law was crafted and enacted. He was one of the three Finance Committee Members signing the introduction of the law (whereby one of the three voted against, Lisa Paus from the Alliance 90/The Greens party) and a vocal and passionate defender of its effects in public in “Der Zertifikateberater” in March 2020 and in several answers on his profile on “abgeordnetenwatch.de”

Even Lothar Binding himself acknowledged the popular naming already in an answer abgeordnetenwatch.de in May 2020.

“Die Bindingsteuer wird 2021 zum Einsatz kommen”. Bislang war mir noch gar nicht bekannt, dass eine Steuer nach mir benannt wurde.

—- (Translation) —-
“The Bindingsteuer will come into effect in 2021.” So far, I was not even aware that a tax was named after me.

As seen above, he stated that the goal was to create an effective prohibition. See: Goal of the Bindingsteuer.

Additionally and, for example, and with regards to taxes on losses.

—- (Frage) —-

Selbst wenn es so wäre, dass nur wenige Anleger Derivate in dieser Form einsetzen, würden Sie diese hart treffen. Denn durch die Begrenzung der Abzugsfähigkeit auf 10.000 Euro im Jahr ist es jetzt tatsächlich möglich, dass ein Anleger Steuern zahlen muss, obwohl er wirtschaftlich Verluste erzielt hat. Ist das Steuergerechtigkeit?
—- (Antwort) —-
Steuergerechtigkeit ist so eine Sache. Anleger profitieren mit privaten Kapitaleinkünften vom günstigen Abgeltungssteuersatz. Es ist ein enormes Entgegenkommen des Staates, dass Gewinne aus Wertpapiergeschäften im Rahmen der Abgeltungsteuer vergleichsweise niedrig besteuert werden. Um Steuergerechtigkeit herzustellen, müssen wir dies erstmal überdenken.

—- (Translation) —-

—- (Question) —-
Even if it were the case that only a few investors use derivatives in this way, it would hit them hard. Because by limiting the deductibility to 10,000 euros per year, it is now possible for an investor to actually pay taxes even though they have incurred economic losses. Is that tax fairness?
—- (Answer) —-
Tax fairness is a tricky issue. Investors benefit from the favorable flat withholding tax rate on private capital income. It is a significant concession by the state that gains from securities transactions are comparatively lightly taxed under the flat-rate withholding tax. To achieve tax fairness, we need to rethink this first.

Note: The answer refers talks about 10,000 EUR in losses offset, because the limit was later raised to 20,000 EUR in December 2021. See December 2020.

Lothar Binding having been asked if taxes on losses are “fair” simply says that one has to work on the definition of “tax fairness”. Because to tax losses, the law formulation taxes winnings infinetely, he knew how everything worked

He also stated, that he, personally, had to protect investors from themselves when answering another question about the Bindingsteuer

Wenn Ihre Altersvorsorge tatsächlich davon abhängt, dass Sie privat am Kapitalmarkt spekulieren müssen, dann ist es vielleicht tatsächlich besser, ich schütze Sie vor sich selbst

—- (Translation) —-
If your retirement actually depends on your need to speculate privately in the capital market, then perhaps it is indeed better for me to protect you from yourself.

Given that he showed perfect understanding of the effects of the law in the interview in “Der Zertifikateberater”, it is schocking he provided 100% wrong information on some answers, like this one.

Auch hier ist ein unterjährig begrenzter Verlustabzug innerhalb der gleichen Einkunftsart möglich und auch hier gilt, dass ein Verlust sich steuerlich nicht schon im Veranlagungsjahr seiner Entstehung auswirken muss. Daher geht die neue Regelung aus § 20 Abs. 6 Satz 5 EStG konform mit dem objektiven Nettoprinzip und entspricht dem Leistungsfähigkeitsprinzip.

—- (Translation) —-
Here too, a loss deduction within the same category of income is possible within the year, and here too, a loss does not necessarily have to affect taxes in the assessment year of its occurrence. Therefore, the new regulation in § 20 (6) sentence 5 of the Income Tax Act is in line with the objective net principle and corresponds to the ability-to-pay principle.

As the “Bundesrat Recommendations 503/1/20” explained, the Bindingsteuer destroyed the concept of the “net principle” taxing.

And the “ability-to-pay” principle is not guaranteed for the taxpayer, because the tax rate is unlimited and with it the tax amount.

In the same interview he also acknowledged that private investors use derivatives to protect other investments, but he considers that to be a rare case, which implies he is ok with the prohibition imposed for private investors.

Not only that, in the same answer he also confronted one of the points made by the “Bundesrat Recommendations 503/1/20”, market speculation is done by private individuals and not by financial institutions/companies.

Denn Termingeschäfte werden von privaten Anlegern nicht nur zur Absicherung von Fremdwährungsrisiken, Marktrisiken oder zur Absicherung von Zins-, Preis- oder Kursniveaus getätigt, wie es bei Unternehmen aus realwirtschaftlichen Motiven die Regel ist, sondern maßgeblich zum “Zocken”

—- (Translation) —-
Because private investors engage in futures trading not only to hedge foreign exchange risks, market risks, or to hedge interest, price, or price levels, as is the norm for companies for real economic reasons, but mainly for “gambling”.

The mocking point at the end, by using the term “gambling” (German: “Zocken”) was a constant across many answers and not only on abgeordnetenwatch.de also in the interview in the “Der Zertifikateberater”.

Wer privat mit Derivaten zocken will, darf das gerne tun, muss dann aber oberhalb der Verlustabzugsbeschränkung auch das Risiko alleine tragen.

—- (Translation) —-
Anyone who wants to gamble privately with derivatives is welcome to do so, but above the loss deduction limitation, they must bear the risk alone.

In addition he states that the derivatives traders do not carry the weight of their own losses, a wrong statement also repeated by Michael Schrodi, his successor on abgeordnetenwatch.de (See Political Status - SPD). The case of a derivatives trader who has passed his tax obligations onto the rest of the taxpayers, has yet to come.

Naming Conclusion

It is because of his role as SPD “Obmann” (Chairman) in the Finance Committe, overseeing the formulation of the law and all of his public statements defending the effects, that he is considered the father and intellectual author.