The Federal State structure of the Federal Republic of Germany is reflected in the distribution of tax revenues. Article 106 of the Basic Law (GG) defines which state level has the authority for the revenues, i.e. how the revenues are distributed between the Federal Government, the Federal States and the municipalities. 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.
With regard to the revenues from extraction royalties, redistribution between the Federal Government and the Federal 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.