Distribution of tax revenue

Distribution of tax revenue

- Constitution of Germany

Article 107 [Distribution of tax revenue – Financial equalisation among the Länder – Supplementary grants]

(1) Revenue from Land taxes and the Land share of revenue from income and corporation taxes shall accrue to the individual Länder to the extent that such taxes are collected by finance authorities within their respective territories (local revenue). Details regarding the delimitation as well as the manner and scope of allotment of local revenue from corporation and wage taxes shall be regulated by a federal law requiring the consent of the Bundesrat. This law may also provide for the delimitation and allotment of local revenue from other taxes. The Land share of revenue from the turnover tax shall accrue to the individual Länder on a per capita basis, unless other­wise provided in paragraph (2) of this Article.

(2) A federal law requiring the consent of the Bundesrat shall ensure a reasonable equalisation of the disparate financial capacities of the Länder, with due regard for the financial capacities and needs of municipalities (associations of municipalities). To this end, additions to and deductions from the financial capacity of the respective Länder shall be regulated in the allotment of their shares of revenue from the turnover tax. The conditions for granting additions and imposing reductions as well as the criteria governing the amount of these additions and deductions shall be specified in the law. For the purpose of measuring financial capacity, it shall be permissible to consider only part of the revenue from mining royalties. The law may also provide for grants to be made by the Federation to financially weak Länder from its own funds to assist them in meeting their general financial needs (supplementary grants). Irrespective of the criteria specified in the first to the third sentence of this paragraph, grants may also be made to such financially weak Länder whose municipalities (associations of municipali­ties) have a particularly low capacity to generate tax revenue (municipal tax-base grants) and, in addition, to such finan­cially weak Länder whose shares of the support funds under Article 91b are lower than their per capita shares.


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