Distribution of taxes
A distinction must be made between primary and secondary tax distribution:
Primary distribution of taxes
It describes the direct distribution of taxes from the citizen to the territorial entity entitled to income, i.e. the payment of the tax burden resulting from legal obligations.
In contrast to this, the secondary tax distribution deals with the distribution of tax revenues within the state structure, i.e. between the regional authorities.
Secondary tax distribution
It describes the state-internal distribution of the taxes collected through the primary tax distribution. The secondary tax distribution includes the state financial equalization and the municipal financial equalization . In order to balance the different tax power between the municipalities and between the states (horizontal compensation) or between the federal government, states and municipalities (vertical compensation), the tax revenue must be divided between the regional authorities according to appropriate criteria. This is the only way to enable all local authorities to present a balanced budget .
The constitutional bases contain the articles Art. 106 , Art. 106a and Art. 107 of the Basic Law. The distribution of taxes is specified in other laws, in particular in the Decomposition Act , the Financial Equalization Act , the Standard Act , the Trade Tax Act and the Municipal Finance Reform Act .
example
The municipalities levy trade tax through the primary tax distribution . In the course of the secondary tax distribution, part of the trade tax income is distributed to the federal and state levels with the help of the trade tax apportionment.
criticism
Critics, including in particular the donor municipalities and countries (i.e. the net contributors), see the secondary tax distribution as a lack of or dwindling incentive to do good business and, in particular, to create good infrastructures.
