Journal of Tax Reform
History of local taxation in Germany
H. Zimmermann
Philipps-Universität Marburg, Marburg, Germany
Abstract
The article discusses the history of local taxation in Germany and its current state, focusing on the correspondence of the existing local taxes to the criteria of optimal local taxation. The author’s hypothesis is that the German system of local taxation, which dates back to the imperial period, can and should be reformed in order to meet the internationally recognized criteria. The analysis is based on several criteria: the general criteria, which apply to all taxes, including federal; criteria for local and central taxes and, last but not least, criteria for relationships between local governments. The history of the three local taxes (property tax, business tax and income tax) is viewed in the light of the above-described criteria. It is shown that the local business tax needs to be adjusted according to the criteria of optimal local taxation. The author also explains why, from the theoretical perspective, it was important to transfer the revenue from the income tax to the local level in 1969 and points out that local governments currently lack the authority to set tax rates. The case of the property tax, introduced in 1936, is particularly interesting, taking into consideration the current plans to amend the existing legislation. The author compares the two possible scenarios of the future tax reforms and comes to the conclusion that only one of them fully meets the international standards. The analysis has shown that the local taxation system in Germany is quite efficient, although there is definitely some room for improvement. The combination of the business tax and the income tax allow local authorities to balance the interests of local households and businesses.
Keywords
local tax, tax history, property tax, business tax, local income tax, history of taxation
JEL classification
H24, H25, H71References
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Acknowledgements
The author is grateful to the unknown referee for helpful suggestions
About Authors
Horst Zimmermann – PhD in Public Finance, Professor Emeritus for Public Finance, Philipps University of Marburg, a member of the Scientific Advisory Board to the Federal Ministry of Finance (Koenigsberger Str. 17, D-35043 Marburg, Germany); ORCID: 0000-0002-9196-0159; ResearcherID: E-5286-2018; ScopusID: 7402792821; e-mail: horstzimmermann1@freenet.de
For citation
Zimmermann H. History of local taxation in Germany. Journal of Tax Reform. 2019;5(1):57–69. DOI: 10.15826/jtr.2019.5.1.060
Article info
Received December 17, 2018; accepted March 12, 2019
DOI: http://dx.doi.org/10.15826/jtr.2019.5.1.060
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