In order to minimize social welfare losses due to tax disincentives, Research Affiliate Prof. Dr. Erik Röder takes a closer look at the taxation of capital gains and presents concrete reform proposals that could also contribute to greater tax fairness.
The event series “Future Issues in Tax Law” attempts to draw attention to opportunities for improved tax structuring that could generate added value for society as a whole in the future. This was also the focus of legal scholar Erik Röder's presentation on September 8, 2025. He put forward proposals for further developing the system of capital gains taxation with the aim of minimizing existing disincentives.
Since the 2008 corporate tax reform, gains from the sale of economic assets, not only business assets but also private assets, have been taxed almost across the board. Röder noted that this has actually exacerbated the well-known problems associated with the taxation of capital gains, including the lock-in effect, the taxation of inflationary fictitious gains, and the pro-gressive effect of concentrated realization of hidden reserves.
The principle that only realized gains are taxed often leads to an accumulation of assets—especially among the wealthy—rather than meaningful investments. Since the relevant eco-nomic assets and, with them, unrealized gains often undergo enormous increases in value over many years, this increasingly results in misallocations for the purpose of tax arbitrage.
In the interests of vertical tax fairness and with a view to real welfare effects, there is an ur-gent need for reform here. Professor Röder sees several possible lines of development for this:
From a legal perspective, profits from the sale of private assets should generally be taxable. To simplify tax law, Section 17 of the Income Tax Act (EStG) should also be deleted without replacement. With the abolition of the source concept for capital income, the provision has lost its original purpose.
Röder sees an additional solution in the consumption-oriented taxation of capital gains: "I have in mind a system in which capital gains are only taxed when they are used for consump-tion purposes. Deferring taxation until consumption would alleviate structural difficulties.“
To this end, the regulatory approach of Section 6b EStG would have to be generalized. ”Hid-den reserves should be freely transferable between different types of economic assets and also freely between different types of income," says Professor Röder. “The ability to reinvest capi-tal gains in a virtually tax-neutral manner would postpone the lock-in effect and the taxation of fictitious profits until the time of consumption.”
Röder concludes by explaining that the measures presented would transform the existing structuring options into a consistent system. They would then be available to all taxpayers and no longer only to those who are wealthy enough to afford such arrangements.
Prof. Dr. Erik Röder has held the Chair of Civil Law, Corporate Law, and Corporate Tax Law at the University of Mannheim since May 2022. Prior to that, he worked as a research fellow at the Max Planck Institute for Tax Law and Public Finance in Munich since 2011. Erik Röder received his doctorate from the University of Bayreuth in 2009 and habilitated at Ludwig Max-imilian University in Munich in 2018. His research focuses on corporate and corporate tax law, with a particular interest in non-capital market-oriented companies
September 2025