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Towards More Efficient Government: Reforming Federal Fiscal Relations in Germany

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  • Eckhard Wurzel

Abstract

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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  • Eckhard Wurzel, 1999. "Towards More Efficient Government: Reforming Federal Fiscal Relations in Germany," OECD Economics Department Working Papers 209, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:209-en
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    File URL: http://dx.doi.org/10.1787/125826214270
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    Cited by:

    1. Guiseppe Pisauro, 2001. "Intergovernmental Relations and Fiscal Discipline; Between Commons and Soft Budget Constraints," IMF Working Papers 01/65, International Monetary Fund.
    2. Roy Bahl & Eunice Heredia-Ortiz & Jorge Martinez-Vazquez & Mark Rider, 2005. "India: Fiscal Condition of the States, International Experience,and Options for Reform: Volume 1 (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper05141, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. Buettner, Thiess, 2002. "Fiscal federalism and interstate risk sharing: empirical evidence from Germany," Economics Letters, Elsevier, vol. 74(2), pages 195-202, January.
    4. Lavrov, Aleksei & Litwack, John & Sutherland, Douglas, 2001. "Fiscal federalist relations in Russia: a case for subnational autonomy," MPRA Paper 26537, University Library of Munich, Germany.
    5. Christian Baretti & Bernd Huber & Karl Lichtblau, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(6), pages 631-649, November.
    6. Lkhagvadorj, Ariunaa, 2010. "Fiscal Federalism and Decentralization in Mongolia," MPRA Paper 28758, University Library of Munich, Germany, revised Mar 2010.
    7. Jorge Martinez-Vazquez & Andrey Timofeev, 2014. "Capital Infrastructure and Equity Objectives in Decentralized Systems," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1410, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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