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In articles nos. 98 and 116, we reported on a constitutional challenge to the trade tax on earnings referred to the Federal Constitutional Court by a single judge of the Tax Court of Lower Saxony.

The Federal Constitutional Court refused to hear the case on the grounds that a single judge lacks authority under Art. 100 (1) of the German constitution to refer questions of constitutionality to the high court (ruling of 5 May 1998 - BB 1998, 1292).

However, the 4th panel of the Tax Court of Lower Saxony, to which the proceeding returned following the ruling of the Federal Constitutional Court, has since resubmitted the issue to the Federal Constitutional Court. Following the arguments of the single judge as reported in our previous articles, the 4th panel stated that it considered the trade tax on earnings to be in violation of the principle of equality before the law under Art. 3 (1) of the German constitution (ruling of 24 June 1998 - BB 1998, 1453).

This cures the procedural defect which attached to the first referral. It therefore appears likely that the Federal Constitutional Court will hear argument on the substantive issues posed.

The tax authorities have issued coordinated all-state directives (dated 1 July 1998 - DStR 1998, 1136) instructing the tax offices to issue all trade tax base assessments (Gewerbesteuermessbescheide) on a provisional basis (sec. 165 (1) AO) pending the outcome of the case. The provisional tax base assessment notices will be automatically corrected should the Federal Constitutional Court void the law on constitutional grounds. For details, we refer to our article in article no. 116, which dealt with the similar directives of 12 December 1997, which are superseded by the new directives.

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