Principles and Practices of Fiscal Autonomy: Experiences, Debates and Prospects by Giancarlo Pola

Author:Giancarlo Pola [Pola, Giancarlo]
Language: eng
Format: epub
Tags: Political Economy, Political Science, Nationalism & Patriotism, Political Ideologies
ISBN: 9781317075851
Google: bQarCwAAQBAJ
Publisher: Routledge
Published: 2016-03-03T12:52:39+00:00

5. Supplementary Federal Grants

After the horizontal elements of fiscal equalization are completed, a second vertical element of equalization comes into play. The central government pays supplementary federal grants mainly, but not exclusively to the relative poor Länder. These grants are non-earmarked funds. They come in two different kinds: general supplementary federal grants and supplementary federal grants for special needs.

General supplementary grants are given to those states whose financial capacity per ‘ennobled’ inhabitant after horizontal financial equalization lies below 99.5 per cent of the average. The shortfall is made up proportionally by 77.5 per cent. In 2014, all 12 recipient Länder of the horizontal step also received these federal grants. With this, the fiscal capacity of the poorest Land, Berlin, was raised from 90.7 per cent to the average to 97.5 per cent.

With the general supplementary grants, the regular system of fiscal equalization ends. Table 7.1 gives an overview of the sums moved in the three steps from VAT pre-equalization to general federal grants. Netted out, five relatively rich Länder paid almost 15 billion Euros, while 11 Länder received equalization payments of almost 18 billion Euros.

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