German Fiscal Research Articles

New Legal Basis for International Risk Assessment Procedures in Germany: ICAP, ETACA

The new section 89b of the German Fiscal Code finally introduces a legal basis for international risk assessment procedures. Under these procedures, which are designed for cooperation and transparency, the tax administrations of two or more jurisdictions must at the request of the taxpayer provide an assessment of any tax default risks for facts already realized. If the risk is assessed as low, a formal review of these facts in a subsequent tax audit may be redundant.

Skimming the Achieved? - Quantifying the Fiscal Incentives of the German Fiscal Equalization Scheme and its Reforms Since 1970

Skimming the Achieved? - Quantifying the Fiscal Incentives of the German Fiscal Equalization Scheme and its Reforms Since 1970

Breaking with Orthodoxy? German Fiscal Policy in the Shadow of Covid-19

ABSTRACT The Covid pandemic confronted the Merkel IV government with unprecedented fiscal challenges. We argue that the government’s response to these challenges constitutes a break with established patterns of German fiscal policy orthodoxy in at least three areas. First, the government suspended the debt brake and gave up the ‘Schwarze Null’ without much debate. Second, it implemented a fiscal rescue package that struck a new balance between the interests of the export and the domestic sector. Third, the government supported a coordinated fiscal response on the European level thereby giving way to debt pooling across EU member states. The article traces the groundwork for these changes that was laid in the first two years of the government and then compares the German fiscal response to Covid-19 with German policy during the Financial Crisis. We conclude by discussing whether Germany has shifted to a new fiscal policy regime.

Recent Changes to the German Fiscal Unity Regime Affecting Inbound Investors

This article describes the German fiscal unity regime for corporate and trade tax purposes (Organschaft). For inbound investors in particular, the German fiscal unity regime used to offer a straightforward opportunity to debt finance acquisitions of German operating companies. Recent legislative changes, however, have made base erosion in Germany via debt push-downs substantially more difficult in this context. With a German partnership as a top holding company, withholding tax issues may still be avoided.

Property Transfer Taxes in the German Fiscal Equalisation Scheme

Innerhalb weniger Jahre haben auser Bayern und Sachsen alle Lander die Satze der Grunderwerbsteuer deutlich erhoht. Es ist plausibel, dass hohere Steuersatze durch Verhaltensreaktionen zu niedrigeren Immobilienumsatzen fuhren. Dafur gibt es inzwischen empirische Evidenz, auch fur Deutschland. Durch die gesonderte Berucksichtigung der Grunderwerbsteuer im Landerfinanzausgleich werden negative fiskalische Effekte der Verhaltensreaktionen zum Teil ausgeglichen. Es besteht also ein Anreiz fur zusatzliche Steuersatzanhebungen. Der Autor zeigt in verschiedenen Szenarien das Zusammenspiel von Verhaltensreaktionen mit den Regelungen zum Landerfinanzausgleich.

The Macroeconomic Effects of German Fiscal Austerity under Different Exchange Rate Regimes: The Experience of Central and Eastern European Countries

According to a familiar two-country Mundell-Fleming framework, the policy of fiscal austerity in Germany should be restrictionary for other European countries with a floating exchange rate, while there is a possibility of an expansionary effect for countries with a peg. Using quarterly data of eight Central and Eastern European countries over the 2002–2014 period, it is found with a four-variable VAR model that fiscal austerity in Germany leads to an increase in the money supply and output, while the effects on the real exchange rate are marginal. Our results contrast with several other studies, that imply that the policy of fiscal stimulus in Germany is beneficial for other European countries. Our results could be interpreted in such a way that demand and competitiveness effects are outweighed by the effect of international flows. A strongest expansionary effect is obtained for Bulgaria, Slovakia and Latvia, which maintain fixed exchange rates, while expansionary effects are weaker for countries with greater exchange rate flexibility, such as Poland, Hungary and the Czech Republic.

The German Fiscal Equalisation System: Taking Account of Differences in Governmental Purchasing Powers

The German Fiscal Equalisation System: Taking Account of Differences in Governmental Purchasing Powers

Sustainability of German Fiscal Policy and Public Debt: Historical and Time Series Evidence for the Period 1850-2010

In the last decades, the majority of OECD countries has experienced a continuous increase in public debt. The European debt crisis has prompted a fundamental re‐evaluation of public debt sustainability and the looming threat of sovereign debt default. Due to a multitude of large scale events in its past, Germany is far from being an exception: In fact, Germany’s peacetime debt‐to‐GDP (Gross Domestic Product) ratio has never been higher. In this paper, we analyse the sustainability of Germany’s public finances against the standard theoretical back‐ground using a unique database, retrieved from multiple sources covering the period from 1850 to 2010. Multiple currency crises and external events offer anecdotal evidence, contradicting the historical perception of Germany as the poster child of European public finance. Given these corresponding breaks in time series, the empirical analysis is conducted for the sub‐periods 1872‐1913 and 1950‐2010. In addition to an anecdotal his‐torical analysis, we conduct formal tests on fiscal sustainability, including tests on stationarity and cointegration and the estimation of Vector Autoregression (VAR) and Vector Error Correction Models (VECM). While we cannot reject the hypothesis that fiscal policy was sustainable in the period before the First World War, the tests allow for a rejection of the hypothesis of fiscal sustainability for the period from 1950 to 2010. This evidence leads to the conclusion that Germany’s public debt is in dire need of consolidation. Albeit a much needed reform, the incompleteness of the German debt brake will have to be addressed in the coming years, in order to ensure that fiscal consolidation actually takes place.

Non–Conformity of Section 15 German Foreign Tax Code Concerning the Taxation of Foreign Family Trusts with EC Law?

This article analyzes the EC law conformity of Section 15 German Foreign Tax Code (‘GFTC’), a special regulation concerning the taxation of foreign family trusts according to German domestic tax law. In particular, it reflects on the current infringement proceeding initiated by the European Commission dating 23 July 2007 and the proposed new amendment of Section 15 GFTC by the German annual tax law for 2009 recently introduced by the German government as a consequence of the infringement proceeding. According to the current German legislation, in case a family trust established its registered office or its management in Germany, the settler as well as the beneficiaries must pay tax on benefits deriving from the family trust. However, for tax anti–avoidance reasons, if the family trust is domiciled abroad, the family trust assets as well as the trust income is attributed to the settler and to the beneficiaries and regarded as derived for domestic tax purposes, irrespective of whether and in what amount benefits are actually derived from the family trust. As a matter of fact, Section 15 GFTC lays down that the income of a foreign family trust is taxed (on a yearly basis) even though no income is distributed to the settler or the beneficiaries but maintained within the family trust. Consequently, this income derived according to Section 15 GFTC has to be declared in the annual income tax return and the non–compliance in doing so should be qualified as tax evasion according to Section 370 German Fiscal Code. The importance of Section 15 GFTC was shown just recently, when the global tax evasion scandal was discovered in February 2008 in Germany. The respective tax evasion discovered was based on the non– disclosure of income derived by family trusts located in Liechtenstein according to Section 15 GFTC.

The Elimination of Holidays and its Effect to the German Fiscal Equalization System: An Empirical Study

In the German system of fiscal equalization Lander (States) with tax revenue below the average get payments from the Lander above the average. The difference between the average and the own tax revenue per capita will be compensated up to 75%. To prevent Lander from getting payments form other Lander by lowering their own tax rates and to get the right information about their ability to pay, the revenue of taxes with taxing autonomy is standardized. But Lander could also influence their tax revenues by the number of holidays, each Land decides on its own. A Land with many own holidays will get lower tax revenues and higher payments in the fiscal equalization system than the same Land with no extra holidays. To collect the real ability to pay of the Lander in the fiscal equalization system, it is necessary to eliminate the effect of the different number of holidays, too. This paper shows an approach to neutralize this effect, calculates its impact to the payments of each Land in the fiscal equalization system and presents some possible reaction of the Lander.

Local Concession Dues and Their Effects to the Payments in the German Fiscal Equalization System

Local authorities charge supply companies with concession dues on gas, water and electricity (Konzessionsabgaben), which are similar to some local taxes (local business tax, real property tax). These taxes have already been included in the fiscal equalization system and in the future concession dues should be treated alike. Its importance in revenue terms is an additional reason for this: concession dues amount to 1.8 bl. - compared to real property tax of typ A of 0.3 bl. If concession dues are treated as mentioned above, payments in the fiscal equalization system may be strategically manipulated. First concession dues and their effects of the payments in the fiscal equalization system will be described. Then I will have a look at the aforementioned strategic policy and its effects on the payments and the arrangements to contain this strategic policy, which is exemplified by the so called city-states (Stadtstaaten).

How to Make German Fiscal Federalism Self-enforcing: A Comparative Analysis

By using the concept of “self-enforcing federalism”, this article aims at an analysis of fiscal federalism in Germany, trying to develop a reform perspective by comparing it with two other fiscal federal orders: centralised Australia and decentralised Switzerland; they may present alternatives for organising a sustainable fiscal federal order. It is being demonstrated that Germany has already introduced a number of opportunism-reducing mechanisms that do, however, not yet suffice. An almost opportunism-free order would need more fundamental reforms, especially with regard to the existing tax-sharing system, the bail-out principle, and the egalitarian equalisation norm. By comparing Germany with Australia and Switzerland, the country might, however, also envisage installing less radical opportunism-reducing mechanisms that would modify the present policy of moving from a more “corporatist fiscal federal system” to a more “decentralised” order.

Testing Sustainability of German Fiscal Policy. Evidence for the Period 1960-2003

In this paper, we test whether German public debt has been sustainable by resorting to a test proposed by Bohn (1998). We apply non-parametric and semi-parametric regressions with time depending coefficients. This test shows that the mean of the coefficient relevant for sustainability has been significantly positive over the time period considered. However, there is a negative trend in that coefficient which seems to have ceased to decline only in the middle to late 1990s. Further, we find evidence that the response of the primary deficit is a U-shaped function of the debt ratio which first declines and then rises after a certain threshold of the debt ratio is exceeded.

German Fiscal Unity 2003

German Fiscal Unity 2003

An Economic Assessment of German Fiscal Equalization Schemes since 1970: What Prospects for A Unified Germany?

The purpose of this contribution is to assess the spatial impact of the German fiscal equalization system between 1970 and 1993, but also since 1995, when the new Länder joined the complex mechanism of German fiscal federalism. One of the most interesting results shows that since 1970, there has been a slow convergence of regional fiscal capacities before redistribution among Western German Länder.

The Maastricht Criteria and Sustainability of German Fiscal Policy

The Maastricht Criteria and Sustainability of German Fiscal Policy

An Inquiry into the Sustainability of German Fiscal Policy: Some Time-Series Tests

Sustainability of public debt has become a major issue in the debate over the success of the European Monetary Union. The authors pursue the question of whether Germany’s fiscal policy is sustainable. With sustainability of a given fiscal policy, the authors refer to a policy that satisfies the intertemporal budget constaint of the government, known as the no-Ponzi game condition. Although this question has been econometrically studied for the United States in many studies, it has not yet been pursued with German time-series data. Using annual data from 1955 to 1994, the results seem to indicate that the intertemporal budget constraint for Germany is not met. In particular, the deficits in the period after 1989 appear to have contributed to that trend. Although the question of whether the latter increase in debt will have a lasting effect is still an important issue, the methodology proposed here may be useful for studying other countries. The authors also briefly discuss the macroeconomic effects of adjustment policies.

Protection in Germany: A History of German Fiscal Policy during the Nineteenth Century. William HarbuttProtection in Canada and Australasia. C. H. ChomleyProtection in France. H. O. MeredithProtection in the United States: A Study of the Origin and Growth of the American Tariff System and Its Economic and Social Influences. A. Maurice Low

Previous articleNext article FreeBook ReviewsProtection in Germany: A History of German Fiscal Policy during the Nineteenth Century. William Harbutt Protection in Canada and Australasia. C. H. Chomley Protection in France. H. O. Meredith Protection in the United States: A Study of the Origin and Growth of the American Tariff System and Its Economic and Social Influences. A. Maurice Low George Mygatt FiskGeorge Mygatt Fisk Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 13, Number 4Sep., 1905 Article DOIhttps://doi.org/10.1086/251179 Views: 17Total views on this site Copyright 1905 The University of Chicago PressPDF download Crossref reports no articles citing this article.