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commission on fiscal imbalance 合集

As the tax law is uniform throughout germany except

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Unformatted text preview: om the workings of a progressive national income tax. Also, there are regional asymmetries entrenched in the multitude of federal programs entailing either transfers to persons, or specific-purpose or bloc grants to regional jurisdictions. Moreover, the regional pattern of equalization will fluctuate in accordance to variations in the local “take-up” rate of such programs and grants. ♦ On the contrary, Australia has put in place an explicit and ambitious equalization scheme that aims at full budget equalization. In establishing a point of reference for such a scheme, Australia does not only attempt to evaluate standardized taxing powers of her states, but also standardized expenditures adjusted for needs and costs differentials among jurisdictions. ♦ In Germany (like in Canada) the focus of equalization is on taxable capacity only, with little or no concern for specific burdens. As the tax law is uniform throughout Germany (except for some limited discretion of municipalities to vary their tax rates), there is no need to standardize taxable capacity among regions (as in Canada), because effective tax collections can be considered to reflect the regional variations of tax potentials.17 17 A uniform state tax regime is, of course, immune against horizontal tax competition among states in a legal sense. However, there could be incentives for the states to relax their tax administration in an effort to attract and foster regional economic activities. Such incentives are to be expected if the shortfall of revenue from lenient tax administration is fully compensated through equalizing grants, which is true for a number of states in Germany. Although there has been suspicion of leniency in some cases, it is, of course, difficult to prove in practice. 43 Commission on Fiscal Imbalance The definition of differentials in tax capacities requires a benchmark. It is found in a standardized “equalization yardstick” (Ausgleichsmesszahl) for state fiscal potentials, which is roughly the average tax revenue per capita multiplied by the population for each state. The procedure is, however, more complex. In particular it comprises an asymmetric bias in favor of city-states whose populations are weighted by a factor of 1.35 (compared to one for the other states).18 This yardstick is compared with the effective financial situation of each state, and the gap is subsequently equalized according to a formula. States below the average (ausgleichsberechtigte Länder) receive a compensation that is to be financed, in progressive steps, by the states above the average (ausgleichspflichtige Länder). The sum of payments received always equals the sum of disbursements; the scheme is thus a complete clearing mechanism. The progressive “tariff” of the redistribution scheme reflecting the degree of interregional solidarity among states is depicted in figure 3. On one side, states whose financial position relative to the national average fall below 92 per cent will benefit from marginal transfers t...
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