Transformation in Revenue Taxation on Public Authorities: Fairer Competition or Fresh Burdens for Local Authorities?

On 1 January 2016 a new German law was passed on revenue taxation on local authorities that partly did not take effect until 1 January 2017. Wilfried Wagner, formerly German Federal Fiscal Court, sees the transformation in revenue taxation on public authorities as merely the transposition of the community law provisions that have applied since 1980 into national revenue taxation law. According to Dieter Dziadkowski, formerly Finance Committee of the German Federal Parliament, the new regulation was created under time pressure and implemented without sufficient preparation. Wolfram Birkenfeld, formerly German Federal Fiscal Court, notes that the new legislation adjusted German laws to conform to their European counterparts. He does not basically see why the new law should lead to any higher burden on the municipalities. For Werner Widmann, formerly of the State Ministry of Finance of Rhineland Palatinate, the new § 2b UStG largely represents the long-overdue adoption of compulsory union legislation on the revenue taxation of publically-run companies. It is very difficult, however, to justify the long transitional period. Thomas Küffner and Jochen Tillmanns, Kanzlei Küffner, Maunz, Langer, Zugmaier, firmly argue that implementing the new rule involves “a huge amount of effort” and question whether the new legislation will be of any economic benefit. Roland Schäfer, German Association of Towns and Municipalities, sees no evidence of municipally-run business making advances at the expense of private companies. According to Jürgen W. Hidien, Fachhochschule für Finanzen of North Rhine Westphalia, Nordkirchen, a real transformation or upheaval in revenue taxation is yet to be achieved. For Marc Desens, University of Leipzig, the new regulation was long-overdue. The end-result of the interpretation in line with EU law will be fairer competition, but it will also place a greater burden on municipalities.