Data collection template and questionnaire

Budget 1990-1994⁶²⁶

	1990 bio DM	1991 bio DM	1992 bio DM	1993 bio DM	1994 bio DM	Total bio DM
Borrowing	20,000	31,000	24,000	15,000	5,000	95,000
Subsidy Länder	2,000	4,000	9,900	14,245	19,477	49,622
Subsidy Federal level	-	-	-	5,960	10,123	16,083
Total	22,000	35,000	33,900	35,205	34,600	160,705

The fund will from 1. 1. 2005 onwards be integrated into the German financial equalisation system. From 2005 until 2019 the Federal level will cover the remaining payments out of the funds. This will be compensated by an annual fix share of the turnover tax.⁶²⁷ With the so called ‘Solidarpakt II ’ (see part on public sector transfer) the support of the Eastern Länder is getting a stabile financial base. The budget from 2005 to 2019 will be 156 bio . € for the compensation of special burdens caused by the unification. In 2019 the funds will finally end.⁶²⁸

4 Public sector transfers
The principal channels through which money is transferred between the Länder and between the Federal level and the Länder in Germany is the German Financial equalisation system.⁶²⁹ The financial equalisation system in its current form exists since 1995 when the separate systems in East and West Germany were merged under the Solidarpakt.
I. Legal basis

• 
  Ambivalence of the constitutional background:
  

Art. 30 GG: Sovereignty of the German Länder

vs.

Art. 72 GG: Equality of living conditions

• 
  Art. 106 and 107 GG: Principles of the financial relation/equalisation between federal and Länder level and among the Länder
  
• 
  (Art. 104a – 106 GG)
  
• 
  Law on fiscal equalisation (Finanzausgleichsgesetz (FAG))
  

II. Tax revenues

Tax revenue is divided between federal government and the Länder as well as between the Länder themselves.

1. 
   Exclusively federal taxes, e.g. consumption taxes.
   

(2001: 155,1 Billion DM)

2. 
   Exclusively “Länder”-taxes, e.g. motor vehicle tax, death duties.
   

(2001: 38,4 Billion DM)

3. 
   “Gemeinschaftssteuern” (shared taxes), e.g. income tax and other profit taxes, turnover tax. These represent the biggest part of total tax yield.
   

(2001: 605,8 Billion DM)

	Bund	Länder	Kommunen
Income tax	42,5 %	42,5 %	15 %
Corporate tax	50 %	50 %	-
Capital gains tax	50 %	50 %	-

d) Other

(2001: 73,5 Billion DM)

III. Financial equalisation scheme

1. ‘Primary’ financial equalisation: distribution of “Gemeinschaftssteuern” (shared taxes) between federal level and Länder and among the Länder

a) Federal level and Länder are outfitted with a certain share of tax revenues

1. Stage: Distribution of income tax and corporate tax Income tax and corporation tax are being distributed according to their point of origin. Income tax: “Domicile principle” Corporate tax: “Production site principle” 2. Stage: Distribution of Turnover tax (“beforehand-equalisation”) Turnover tax revenues are being split up between federal government, Länder, and local districts (“Kommunen”). Local districts receive 2,2 % of total revenues, the rest is split up as follows: Federal government: 50,5 %. Länder: 49,5 %. ¾ of the states share is apportioned by population, ¼ is reserved for “financial frail” states. This shall ensure that the fiscal resources of each Land are raised to at least 92 % of the average. (Since 1995 the new Länder got 12,6 billion DM by horizontal turnover tax distribution. Source: http://www.bundesregierung.de/artikel,-35816/Laenderfinanzausgleich-und-Sol.htm)

[Scale of redistribution under this “beforehand-equalisation” in 2001: About 15 Billion DM (=12 %) of the states’ share of total turnover tax yield of 124,8 Billion DM.]
2. ‘Secondary’ financial equalisation: real financial equalisation; corrects the primary tax distribution to guarantee equal per capita tax distribution among the Länder
In power since 1995 (so called Solidarpakt). Before this date, separate systems were applied in East and West Germany.
Financial power measurement number (Finanzkraftmesszahl) = Länder revenue from taxation after beforehand turnover tax equalisation plus 50 % local district tax revenue minus harbour charges (Hafenlasten) of coastal Länder (Hamburg, Bremen, Mecklenburg-Vorpommern, Niedersachsen).

The result is compared with the so called equalisation measurement number (Ausgleichsmesszahl), which serves the determination of financial requirement (defined as the average financial equipment of all Länder per capita, which is multiplied with the population number of the respective Land. Because of the special requirement of the city states, their population is taken into account with the factor 1,35.

If in the end the equalisation measurement number id higher than the financial power measurement number the Land is entitled to get financial equalisation. It financial power is lift to 95% of the average financial power.
b.) Federal level and Länder compensate deviations of their fiscal capacities

3. Stage: Specific horizontal equalisation scheme (“Länder-Länder-finanzausgleich”) The “rich” states compensate the “poor” through financial transfers. Compensation of shortfalls: Percentage of average fiscal capacity Compensation Up to 92 % Full 92 to 100 % 37,5 %