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The framework for fiscal federalism in Germany and its impact on environmental taxation

This article examines the fiscal federalism framework in Germany and its influence on environmental taxation. It explores the levels of environmental action, German federal tax legislation, non-tax measures, and specific policies in Germany's Basic Law. The article also discusses the Vehicle Tax Act, Electricity Tax Act, and Energy Tax Act, along with their implications for environmental taxation.

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The framework for fiscal federalism in Germany and its impact on environmental taxation

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  1. The framework for fiscal federalism in Germany and its impact on environmental taxation byVolker Heydt, Brussels,retired Head of unit TAXUD E3 of the European Commission, Member of the Hamburg bar volker.heydt@skynet.be

  2. Basic Law (Grundgesetz = Constitution), Art. 104a (1) The Federation and the Länder shall separately finance the expenditures resulting from the discharge of their respective responsibilities insofar as this Basic Law does not otherwise provide. • (2) Where the Länder act on federal commission, the Federation shall finance the resulting expenditures. volker.heydt@skynet.be

  3. His funeral monument: 5 levels volker.heydt@skynet.be

  4. Paul Otlet (1868-1944)promoter of peace by international organisation, founder of the Mundaneum, conceived the internet as early as 1934 in his „Traité de documentation“ His funeral monument, designed by himself, represents 5 levels (from top down) • Universal • International • National • Regional • Local volker.heydt@skynet.be

  5. Levels of environmental action • Universal Kyoto Protocol • Inter(supra-)national EU directives • National national laws • Regional regional by-laws • Local local statutes volker.heydt@skynet.be

  6. Germany - a federal State volker.heydt@skynet.be

  7. EC Directive 2006/32 on energy services, Art. 3 • (m) ‘financial instruments for energy savings’: all financial instruments such as funds, subsidies, tax rebates, loans, third-party financing, energy performance contracting, guarantee of energy savings contracts, energy outsourcing and other related contracts that are made available to the market place by public or private bodies in order to cover partly or totally the initial project cost for implementing energy efficiency improvement measures; volker.heydt@skynet.be

  8. German tax revenue collected before redistribution (2008) volker.heydt@skynet.be

  9. No specific policy rules in Germany‘s Basic Law • Contrary to the EU Treaties, where a specific title „Environment“ (Art. 191 – 193 TFEU) can be found in which also the term „climate change“ is mentioned, these terms are absent in the German constitution (Basic Law) • However, this does not mean that Germany doesn‘t have a policy in this area volker.heydt@skynet.be

  10. German environmental policy • Germany has sued a policy which gets it close to Scandinavian standards • Most progress under government Schröder/Fischer; environment Minister Trittin (Green party), and last government (Minister: Gabriel, SPD) • current government (Merkel/Westerwelle) continues previous efforts, but is against introduction of a CO2-tax volker.heydt@skynet.be

  11. German federal tax legislation • Vehicle Tax Act (Kraftfahrzeugsteuergesetz) 1927 • Electricity Tax Act (Stromsteuergesetz) 1999 • Energy Tax Act (Energiesteuergesetz) 2006 (previouslyMineral oil tax Act volker.heydt@skynet.be

  12. German non-tax measures • Kraft-Wärme-Kopplungsgesetz (Act onuse of power for heatinga) 2002 • Renewable Energies Act (Erneuerbare-Energien-Gesetz) 2008 • Act on renewable energies-warming (Erneuerbare-Energien-Wärmegesetz) 2008 • Guidelines on environment premia for purchase of new cars as replacement of at least 9 year old cars („Abwrackprämie“) 2009 volker.heydt@skynet.be

  13. Vehicle Tax Act 1927/2009 • Originally imposing an annual tax according to motor size (x Mark per 100 cc) • now a mix of tax determining factors, most important the differentiation of tax burden (by temporary exemption or rebates) according to emission of the car prototype(no measurement of the individual car) • 2009: federal, no longer Länder revenue volker.heydt@skynet.be

  14. Electricity Tax Act1999 • Consumption tax, administered by the (federal) Customs Administration • rate 20,50 Euro per MWh, reduced 12,30 (industry, farmer) • Levied from provider, also due if imported • Link to social security contributions • Relief, if climate protection goals agreed with industry in 1999 are achieved volker.heydt@skynet.be

  15. Energy Tax Act 2006 • Replaces the former Mineral oil tax, hits in the first place car use • Rate: e.g. gasoline >650 €/1000 l • High yield: almost 10% of total tax revenue • A lot of exemptions (aircraft) and reduced rates (e.g. heating) according to processes or international competition • Weak point: import in private cars, tax free purchases by diplomats volker.heydt@skynet.be

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