Unformatted text preview: of about 380 million German Marks. Secondly, the scale according to which money is
skimmed off for financial equalization now creates greater incentive: the maximum amount which can be skimmed off in
donor states has gone down from 80% to 75%, and it will only apply if a state reaches 120% of the average financial
strength of all states (up to now they started skimming off at 110%). In addition a system of premiums will be introduced
according to which 12% of the state’s above-average tax receipts must not become subject to financial equalization. And
thirdly, the eastern states have been provided with a high degree of security. Up until 2019 they will receive further
support from the confederation in the amount of 306 billion German Marks. When this recovery program will definitely
have come to an end in 2019, the eastern states will have received special grants for 30 years - for a whole generation and by then they will have successfully caught up economically with the western states.
With this financial equalization we have introduced subsidiary character and competition among the states - efficient
principles to organize our federal structure. 6. OUTLOOK ON EUROPE In Bavaria we believe that the principles of competition, a subsidiary character, and diversity should also become the
role model for the architectural structure of Europe’s nations. The nations of the European Union face the dual challenge
of expansion and consolidation.
The approaching eastern expansion of the EU which will take place over the next few years will also come as a great
financial challenge to Germany as EU’s biggest net payer. However, the extent of financial solidarity towards the new
European neighbours must not be overstrained considering the somewhat limited efficiency of the present EU nations.
From our experience with German reunification we know that economically less efficient member states will certainly
need at least 30 years to catch up. And we will tackle this task as well. 59 Commission on Fiscal Imbalance 7. TABLE 1
VERTICAL APPORTIONMENT OF TAX REVENUE
Federal Taxes, State Taxes, and Municipal Taxes. The revenue of the following taxes accrues wholly to one tier of
government in Germany:
FEDERAL TAXES STATE (LAND) TAXES MUNICIPAL TAXES - Spirits monopoly - Inheritance tax - Municipal trade tax - Insurance Tax - Real property transfer tax - Real property tax - Customs duties and other levies
required by the European Union - Motor vehicle tax - - Beer tax - Excise taxes on tobacco, coffee,
sparkling wine and mineral oil Local excise taxes and taxes on
certain non-essential spendings (e.g.
dog tax, beverage tax) - Tax on betting and lotteries - Gaming casinos levy - Fire protection levy Joint Taxes. The revenue of the most important taxes is shared by the Federation, the States (Länder) and the
Communes as follows: Wages and Income tax Corporation tax T u r n o ve r t a x Federation 42,5 % 50 % 52,2 % States (Länder) 42,5 % 50 % 45,7 % 15 % --- 2,1 % Communes 60 Commission on Fiscal Imbalance 8. CHART 1
DISTRIBUTION OF TAX REVENUE IN 2000 IN BILLION GERMAN MARKS
(total DM 914 billion) Local taxes
State taxes only motor
(vehicle inheritance) 36.1 European Union
6.6 Common taxes (income
628,9 on earnings,
651.8 Federal taxes (especially
taxes on consumption)
147.7 61 Commission on Fiscal Imbalance CHART 2
REMAINING SURPLUS OF A STATE (LAND) RESULTING FROM A 1 MILLION DM INCREASE I...
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