Public finances are the reality of any constitution. Those who do not have sufficient financial resources of their own have no power to exercise their competences. Especially in a federal state, the distribution of financial resources is therefore of central importance. In Germany, the distribution of tax revenues is expressly regulated in the constitution. The financial equalisation between the Federal Government and the Länder (State) governments is particularly important and has been the subject of several cases before the Federal Constitutional Court. The aim of the constitution is to enable the Federal Government and the Länder to perform the tasks assigned to them under the constitution. Only in this way can the state autonomy of the Federation and the Länder become a reality and autonomy and responsibility for the performance of tasks develop. The financial constitution is therefore a cornerstone of the federal system.

This talk will discuss the principles of tax distribution in Germany between the Federal and State governments. First, it deals with vertical fiscal equalisation between the Federal Government and all of the State governments. It should be emphasized here that the most important taxes, such as income tax, corporate income tax and sales tax, are shared by the Federal and State governments. These joint taxes comprise almost three quarters of total tax revenue in Germany. The horizontal financial equalization then regulates the distribution of tax revenue among the individual states. Finally, this talk observes that the political power of the Federal, State and local governments also depends on the extent to which the Federal Government is allowed to spend its tax revenue in the States or municipalities. Here, too, there are constitutional provisions that must be observed in a federal state.

Dr Mellinghoff's visit in Australia is supported by Konrad Adenauer Stiftung (KAS) and this lunch-time seminar is co-hosted by the Tax Group and Centre for Comparative Constitutional Studies, Melbourne Law School.

Light lunch will be provided.