National Financial Equilibrium
In the year 2021, Germany's federal financial equalization scheme distributed over €17.1 billion, with the distribution heavily influenced by each state's fiscal capacity. This means that a state's contributions and receipts depend on their economic strength and tax revenues.
Bavaria, with a per capita contribution of €687, was the highest contributor, paying in €9 billion, which accounted for 53% of the entire fund. Baden-Württemberg followed closely, contributing €4 billion, with a per capita burden of €361 per resident. Hesse contributed €3.6 billion, with a per capita burden of €566, higher than Baden-Württemberg.
One state that saw a significant change in its role was Rhineland-Palatinate. The high profits of the Mainz-based vaccine manufacturer BioNTech, totaling €287 million, boosted Rhineland-Palatinate’s fiscal capacity, transforming it from a recipient state to a contributor. This change raised its contribution to €230 million.
Berlin remained the largest recipient, receiving €3.6 billion. Saxony followed Berlin with €3.2 billion, while Saxony-Anhalt received around €2 billion. North Rhine-Westphalia, which was a contributor in the previous year, received €200 million from the equalization fund in 2021.
Bremen had the highest per capita support of €1,233, followed by Berlin with €983 and Saxony-Anhalt with €911.
Interestingly, the federal equalization scheme operates by comparing each state’s fiscal strength, which includes corporate tax payments, incomes, and other revenues, to redistribute funds and achieve equity across the federation. States with booming industries or special economic events, like BioNTech’s vaccine success, see increased tax contributions, thereby lowering their need for incoming equalization payments and sometimes turning them into net payers.
In conclusion, the financial performance of a single major company like BioNTech can have a significant impact on federal fiscal redistribution among states, as seen in the case of Rhineland-Palatinate in 2021. The scheme aims to balance disparities across the federation, making it a crucial aspect of Germany's financial landscape.
Other states might find themselves in Rhineland-Palatinate's position, where a successful business in finance or another sector could potentially increase their fiscal capacity, changing their role from recipients to contributors in the federal financial equalization scheme. The scheme's principle of redistributing funds based on each state's fiscal strength creates an opportunity for competitive economic growth within Germany's business landscape.
