Horizontal or vertical? The future of the German fiscal equalisation system

Abstract

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Tax Morale and Fiscal Autonomy: Evidence from Germany

“…When calculating the revenue volume of the municipal budgets of the three city-states of Berlin, Bremen and Hamburg, some distinction problems arise. These three federal states do not separate their municipal budgets from their respective federal budgets and thus only have a federal budget (for a discussion about the political and fiscal federalism see also Seitz, 2000;Spahn, 2000). Particularly when it comes to tax revenues, but also in the field of revenues from fees, the communal assessment of the three city-states makes it difficult to calculate their respective municipal revenues.…”

Making Economic Growth more Socially Inclusive in Germany

“…The current revenue-sharing system including fiscal federal transfers is based on population as well as on multipliers which only reflect differences in population density (Söllner, 2001). Although, additional discretionary transfers exist, in part to account for differences in long-term unemployment rates, they do not take into account additional socioeconomic and demographic characteristics, such as migrant status, or age composition, in the population structure across the Länder, which contribute to different levels of demand for public services provided by Länder and municipalities on their territory (Feld et al, 2013;Heinemann, 2012). It should be considered to enlarge the set of criteria based on which transfers are provided, e.g.…”