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 Federal States and the municipalities is regulated by Article 106 of the Basic Law (GG). Here a distinction is made between so-called “community taxes” and taxes which flow in their entirety to the municipalities, Federal States or Federal Government. In the case of community taxes, the revenues are shared between the Federal Government and the Federal States.
Trade tax, on the other hand, is purely a municipal tax. As the most important source of income of the communities, it is allocated to the individual municipalities in which the relevant operating facilities are situated. The Federal Government and the Federal States’ share in the revenues of the trade tax through a specific allocation and redistribution mechanism.
As per § 3 of the Tax Code, the tax revenues from the extraction of natural resources are not earmarked for a specific purpose; the state entities responsible for the Federal Budget, the Federal State budgets and the municipal budgets decide how the revenues 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 Federal 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.