Lessons from Spain, Germany and Canada
Studies in Fiscal Federalism and State–local Finance series
Edited by Núria Bosch and José M. Durán
Chapter 9: The Decentralization of Tax Administration in Germany: Consequences
Alexander Ulbricht 1 INTRODUCTION Germany (and Bavaria, as one of its Länder) is usually taken as a model case because of its well organized and eﬃcient decentralized tax administration. After giving a brief overview of the main features of the German tax system, this chapter will focus on the organization of the German tax administration and will give examples of the consequences of a decentralized administration in the German case. 2 MAIN FEATURES OF THE GERMAN TAX SYSTEM Germany is a federal, federative state. This means that Germany consists of individual states – called Länder – which have their own rights, powers and tasks, but which are also part of a single, larger entity – the Federation. The government is divided into three basic levels (Federation – 16 Länder – communities). Each level has certain tasks determined by the German Constitution (Grundgesetz, GG) and has to ﬁnance the expenses incurred by fulﬁlling their constitutional responsibilities. This is called the ‘connectivity of task and expense responsibility’, which is one of the central principles in the German tax system. Therefore, the Constitution also regulates the assignment of tax revenue. This generally ensures that each level is able to fulﬁl its tasks. Table 9.1 shows some examples of the tasks and tax revenue assigned to the speciﬁc political levels. At the federal level, for instance, social security appears as a constitutional responsibility. In order to ﬁnance this, the Federation receives a portion of the income tax. As can be seen, some...
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