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Revenue allocation

How are the revenues of the extractive industry allocated?

The Federal state structure of the Federal Republic of Germany is reflected in the distribution of tax revenues. The level which has the authority for the revenues, i.e. how they are distributed between the Federal Government, the states and the municipalities is regulated by Article 106 of the Basic Law (GG), in which a distinction is made between so-called ‘community taxes’ and taxes which flow in their entirety to the municipalities, states or Federal Government. In the case of community taxes, the revenues are shared between the Federal Government and the states.

With regard to the extraction of natural resources, corporation tax and income tax are relevant examples of community taxes. The Federal Government and the states are each allocated 50 % of corporation tax revenues.

Trade tax, on the other hand, is purely a community tax, and as the most important source of income of the communities, it is allocated to the individual municipalities in which the relevant operating facilities/factories are situated. The Federal Government and the states’ share in the revenues of the trade tax through a specific allocation and redistribution mechanism.

With regard to the revenues from extraction royalties, redistribution between the Federal Government and the states also takes place. The revenues flow into inter-state financial equalisation. The Federal Government is entitled to the revenues from electricity and energy taxes.

As per § 3 of the Tax Code, the tax revenues from the extraction of natural resources are not earmarked for a specific purpose; the persons responsible for the Federal Budget, the state budgets and the municipal budgets decide how they will be used. The amount and use of revenues and expenditure are disclosed in detail every year. To this end, the Federal Government and the states adopt budget laws (the municipalities adopt budget statutes) that include their own budgets. When the budgets are published, all citizens then have free access to the information.

To facilitate public access to information on the use of tax revenues, the BMF publishes information about the Federal Budget on the web platform. You can also visit the website for information on other budgets