Fiscal Federalism and Political Decentralization
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Fiscal Federalism and Political Decentralization

Lessons from Spain, Germany and Canada

Edited by Núria Bosch and José M. Durán

This book analyzes political decentralization and fiscal federalism in Canada and Germany, both traditional federal countries, and in Spain, a unitarian country engaged in the last two decades in a process of decentralization. Three key issues required for a well designed financing system are analyzed in depth, namely: tax assignment, equalization grants – i.e. redistribution of money from the wealthy regions or the national government to poorer regions, and the role of local governments in the administration of taxes.
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Chapter 9: The Decentralization of Tax Administration in Germany: Consequences

Alexander Ulbricht


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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