German tax law is bound by a large number of framework conditions that go back to the Basic Law. In addition to the objective net principle and the subjective net principle and the performance principle, the requirement of consistency is also of great importance. It stipulates that the legislature as well as the judiciary and the executive are bound by existing legal provisions in their work. Even the abolition, but above all the amendment of laws, can sometimes constitute a breach of law if their effect is the opposite of what was previously the case. Moreover, legislation and regulations must be specific and coherent.

First Commandment of Consistency – Introduction

Everyone should know that we live under the rule of law. That is why we expect the same law to apply to all citizens. No one should be favored or disadvantaged. But what exactly is meant by that? And what impact does this have on the taxes we have to pay?

This article deals with a central question of German law, which by no means naturally also affects tax law. Because sometimes the obvious things that we assume so unreflected in everyday life are embedded in a complex shell and wait for a detailed explanation so that we understand them better. Only if we manage to grasp all the principles of the German legal system is our understanding of tax laws complete. This time we are talking about a particularly important legal principle, namely the principle of consistency.

2nd requirement of consistency: development of the rule of law

Rule of law principles are therefore the framework that works through all our laws. They are based on the Basic Law. For many aspects of German tax law, Article 3 GG in particular is decisive. He determines that all men are equal before the law. Based on this simple determination, a large number of legal derivatives have been developed by jurisdiction over time. One of the central statements here concerns the legislative and executive alike. In its judgments, the Federal Constitutional Court stated that the state only acts in accordance with the Basic Law if it acts without arbitrariness.

3. Effects of the requirement of consistency

But what exactly does the prohibition of arbitrariness mean? The ban requires that the state – whether legislative, judicial or executive – does not create norms that are outside a certain, already established context. As a requirement of consistency, it requires the authorities to always act according to logical standards, determined and consistent. The effects of their actions must therefore be both coherent and not inconsistent with other rules. They must also contain specific, clear provisions.

So you can expect that, for example, as a road user, you are universally forced to stop at every red light. The legislator must therefore under no circumstances determine that taxpayers, for example, do not have to take this into account, because there is no logical reason for this. If, however, there are to be exceptions, they must be well founded, obeying the principle of consistency. At the same time, however, they must not completely repeal any of the previous regulations in order to achieve the opposite. In order to remain in the aforementioned example, the road traffic regulations must not be changed to the effect that in future you have to stop at a green light and can drive in red. Or that you have to expect a fine when stopping at a red light, but do not have to fear any legal consequences when driving over a red light.

4. The requirement of consistency in tax law

To give an example from German tax law, there was a legislative initiative in 2006 with which the legislature de facto wanted to abolish the commuter fee from 2007. Thus, he argued that all trips that employees make on the way to work are privately initiated. Private costs are excluded as advertising costs. Ergo, there should also be no more advertising costs for coping with the routes to work. Thus, the so-called factory gate principle was invoked: work began only when the factory gate was crossed.

Until then, however, employees could deduct these expenses as advertising costs, because they are essential for generating their income from self-employment (§ 9 EStG). But these costs were also relevant for freelancers and other self-employed entrepreneurs, albeit within the scope of tax-deductible operating expenses (§ 4 EStG). It is also in line with the objective net principle. It can also potentially affect the subjective net principle. And now suddenly a different provision should apply, declaring the costs as purely private expenses.

When this case was submitted to the Federal Constitutional Court, the legislature had to justify why it made a fundamental change in its conception and now considered the work trips as purely private, when it had previously proceeded from the exact opposite. It was obvious that the new legal situation contradicted the requirement of consistency, because now one and the same fact led to a completely different assessment. Furthermore, there was no logical justification for the change of this view.

No wonder then that the Federal Constitutional Court overturned this regulation again. Because the requirement of consistency requires that all laws build on each other and interlock, so that everything is logically linked. And this also applies to legal tax regulations from the past, which generally does not tolerate any opposing new regulations in their effect.

5th Commandment of Consistency – Conclusion

So, as we have seen, it is anything but easy to disempower existing laws by new, opposing ones. What is legal and right today must by no means lead a future law completely ad absurdum. The legislator may make additional regulations, but these must also fit logically coherently with the previous regulations. It also means that when creating new regulations, legislators must ensure that future changes or additions are still possible without contradicting the currently created standards.

A nice example of this is the waiver of an independent tax regulation for the taxation of cryptocurrencies. Surely it would have been tempting to create completely new, own standards for this. Instead, the existing regulations have been examined to see whether they are suitable for taxing cryptocurrencies. And actually, this is the case.

In addition, tax laws must be consistent. Experience in this regard was gained in Tübingen, for example, when the packaging tax was introduced, where it was initially questionable whether the requirement of consistency applies unrestrictedly. Because the amount of the levy was initially considered too vague.

The requirement of consistency is thus a central element of German laws, especially tax laws. Nevertheless, it is by no means an all-encompassing obstacle to the legislative freedom. If, for example, the justification of new regulations that conflict with older standards is sufficiently accompanied by an intended steering effect, then the requirement of consistency is overturned. This is precisely what is generally quite easy with tax laws. The legislator must clearly state his motivation in the explanatory statement in order to overturn existing regulations. This would certainly be the case, for example, with an environmental steering effect.