commission on fiscal imbalance 合集

1 prevailing law for financial equalization and its

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Unformatted text preview: according to the place of residence or be divided between the place of residence and the place of work. This is particularly important for the three city states of Hamburg, Bremen, and Berlin which have a great number of commuters coming from the surrounding areas (Lower Saxony, Schleswig-Holstein, and Brandenburg). Their wage and income tax, respectively, go exclusively to the surrounding states, but at the same time they use the local infrastructure (theatres, schools, universities, hospitals) of the city states. Bavaria has come to the conclusion that these are spillovers which should be dealt with on a bilateral basis between the city states and its neighbours and could be solved by means of compensation payments. A modified distribution of public revenue would not be the right approach to this problem concerning the cities and their surrounding states. In essence the states’ share of the turnover tax is distributed according to the number of inhabitants, but up to 25% of the revenue goes to financially weak states - mainly the new German states - depending on their financial strength. In this way legislature makes sure that the tax receipts of financially weak states are raised to up to 92% of the average tax receipts of all states per inhabitant. 5. FINANCIAL EQUALIZATION AMONG THE STATES 5.1. Prevailing Law for Financial Equalization and its Weaknesses Guests from abroad who visit Germany to gather information on our fiscal system often look at me in disbelief when I explain to them our system of financial equalization among the states. Allegedly (so they heard) there is this fiscal system in Germany that makes sure that richer states pay billions from their own budgets to poorer states - and all that on top of the distribution of public revenue which has already provided these states with at least 92% of the average tax receipts of all other states. At the end - after the confederation has made additional grants - all states are to have nearly 100% of the average tax receipts per inhabitant. There are even cases, they say, where formerly poorer states have actually overtaken formerly richer states in their financial strength. And all I can say is that - yes - it is true. But why? Our system of financial equalization among the states strives for balance in a field of conflict, i.e. between the federal states’ sovereignty and their loyalty to the confederation. The applicable constitutional directive stipulates the safeguarding of an appropriate adjustment if financial strengths vary. This has also to be taken into consideration in the 57 Commission on Fiscal Imbalance pursuit to create equal living conditions. There can be no federalism without accepting difference and variety. Therefore these conflicting issues, the federal states’ sovereignty and their loyalty, which are present in all states, have to be adjusted time and again. Bavaria takes the view that the same that we hope to achieve for our citizens should also hold true for the states: good perfo...
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This note was uploaded on 03/06/2013 for the course ECON 220 taught by Professor Paulo during the Spring '13 term at University of Liverpool.

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