A regional German court has taken a decision that could cost the government billions of euros. It has ruled that the "solidarity" income tax surcharge introduced in 1991 to help rebuild eastern Germany is unconstitutional. The matter will now go before Germany's top court.

A German court has ruled that the so-called "solidarity surcharge" on income tax that was introduced in 1991 to help fund public investment in the former communist east of Germany is unconstitutional - a decision that could cost the government billions of euros.

The finance court for the northern state of Lower Saxony ruled that a legal complaint by a taxpayer against the surcharge, which is calculated at 5.5 percent of an individual or company's income tax bill and which is paid on top of income tax, should now be considered by Germany's highest court, the Federal Constitutional Court.

The taxpayer had filed a legal complaint claiming that the surcharge is unlawful. The Lower Saxony court judge, Georgia Gascard, said the surcharge was introduced to cover the costs of German reunification. "But that is a long-term requirement which was not allowed to be covered by raising a supplementary contribution," she said.

An earlier constitutional court opinion dating back to 1954 had stated that any supplementary tax such as the solidarity surcharge could only be introduced to cover temporary financial requirements.