Distribution of Revenues : Germany

In order to meet their responsibilities, the federal, state and local governments must have the necessary funds. Wide-ranging as public responsibilities are, the sources of revenue are equally varied. The main source is taxation. Total tax revenue in 1996 was DM 800.01 7 billion. The EU’s share was 4.9 percent, that of the Federation 42.3 percent, that of the states 41.0 percent and that of the municipalities 11.8 percent.
Tax revenue has to be distributed according to the size of the responsibilities of the three levels of government. Income tax and turnover tax are the “joint taxes”, that is to say, revenues from them are distributed between the federal and state governments

according to specific formulas (that of the turnover tax being renegotiated from time to time). Part of the revenue from income tax also goes to the municipalities. In exchange they have to surrender to the federal and state governments part of the revenue they raise from the trade tax, which used to be a purely local government tax.

Germany’s payments to the budget of the European Union are financed from the tax revenues of the Federation. Customs duties and agricultural levies are remitted to Brussels according to their yield. In addition, the European Union receives own resources from value-added tax (VAT) revenues which are assessed according to a base uniformly defined for all the Member States.