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Towards More Efficient Government: Reforming Federal Fiscal Relations in Germany

Listed author(s):
  • Eckhard Wurzel

In Germany fiscal relations between the various levels of government have come to the fore of the policy debate. In practice the federal fiscal set-up has evolved towards consensus and co-operation, where equalisation of living standards takes precedence over public choice and economic incentives. Shared taxes and the low reliance on own taxes make for a relatively inefficient control over public spending. At the same time, the system may be criticised for not achieving economic convergence among the states. The difference in regional living standards is smaller than in some other economies, but the revenue equalisation system offers no incentives to expand the tax base and may even promote tax avoidance. Greater dynamism could be achieved with a less confiscatory equalisation system and a higher degree of tax autonomy and both of these should form part of any balanced tax and expenditure reform ... Le débat politique en Allemagne s’intéresse depuis quelque temps aux relations budgétaires entre les divers niveaux d’administration. Dans la pratique le système fiscal fédéral a évolué dans le sens du consensus et de la coopération, l’harmonisation des niveaux de vie l’emportant sur les choix publics et les incitations économiques. Les possibilités d’exprimer des préférences régionales et locales en termes de dépenses publiques restent très limitées. Le partage des recettes fiscales et le recours très restreint aux recettes fiscales propres se traduisent par un contrôle relativement inefficace des dépenses publiques. Simultanément, on peut dire que ce système n’a pas permis d’assurer la convergence économique entre les Länder. Les différences de niveau de vie entre régions sont plus faibles que dans certains autres pays, mais le système de péréquation des recettes fiscales n’offre aucune incitation à accroître l’assiette des impôts et va même dans certains cas jusqu’à favoriser ...

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 209.

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Date of creation: 10 Feb 1999
Handle: RePEc:oec:ecoaaa:209-en
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