Structure of Legal Acts which Determine the Payable Obligations of Municipal Authorities in European Countries


Project Report, 2007
16 Pages

Excerpt

Table of Contents:

A. Introduction

B. Germany
I. Constitutional Foundations
II. Revenues and Tax Law
1. Communal Dues
a) Legal Basis
b) Types of Communal Dues
aa) Taxes
bb) Charges
cc) Shares
2. The Rules of Precedence
a) Particular Covering Resources
aa) Miscellaneous Revenues
bb) Charges for Efficiency
b) General Covering Resources
c) Loans
3. A Practical Problem: Cross Border Leasing
III. Budget Law
1. Constitutional Provisions
a) Personal Responsibility in Terms of Money
b) The Burden to Provide Financing
aa) The Relationship between the Federation and the Federal States
bb) The Relationship between the Federation/Federal States and the Communes
(1) Principle of Connection
(2) Communal Tasks Delegated by the Federal States
(3) Communal Tasks Delegated by the Federation
2. Provisions in Communal Laws
a) Budgetary Principles
b) The Annual Budgetary By-law
aa) The Annual Budget
bb) Extracurricular Expenditures
cc) Commitment Authorisation

C. Austria
I. General Principles and Key Data
II. Financial Agreements over several years
III. Dialogue between Local Authorities, Federal States and Federal Government
IV. Tax Sharing Criteria
V. Charges and their Political Aspects
VI. Special Financial Funds
VII. Advantages of joint Federal Taxes
VIII.Cost-bearing Provisions
IX. Consulting Mechanisms in the Sphere of Delegated Authority

Literature:

- Becker, Ulrich, Heckmann, Dirk, Kempen, Bernhard, Manssen, Gerrit, Öffentliches Recht in Bayern, publishing company: C. H. Beck, 3rd edition, 2005

- Gemeindefinanzen in Deutschland, verfassungsrechtliche Grundlagen, available at: http://www.bertelsmann-stiftung.de/bst/de/media/C_Verfassungrecht.pdf

- Steiner, Udo, Besonderes Verwaltungsrecht, publishing company: C. F. Müller, 8th edition 2006

Abbreviations and Acronyms:

illustration not visible in this excerpt

A. Introduction

Along with the competence of Municipalities to administrate tasks of local importance comes the responsibility to finance these tasks of communal administration. This can be regulated in different ways, as will be shown by this elaboration.

B. Germany

In order to understand the communal budget law, it is helpful to go back to the constitutional foundations.

I. Constitutional Foundations

With reference to the polity (Staatsorganisation) as well as the public finance (Finanzverfassung), the German Grundgesetz (Basic Law – Constitution of the Federal Republic of Germany, in the following GG) distinguishes between two vertical levels, the Federation (Bund) and the Federal States (Bundesländer). As a matter of principle, Article 30 GG contains the prior-ranking position of the Federal States in any sphere of the performance of public tasks. This principle is generally kept as far as Law concerning municipal administration is concerned, which is thus regulated by the Federal States. The prominent position of the Municipalities is based on Art. 28 (2) GG which guarantees the right to local self-administration.[1]

II. Revenues and Tax Law

Municipalities can only administrate their tasks when there are enough revenues at their disposal. They must therefore have the possibility to accumulate income e. g. by means of communal dues.

1. Communal Dues

Communal Dues serve as a credit instrument for the Communes. There is no legal definition of communal dues, but they can be described as duties as to which Communes have all or part of administrational rights (Verwaltungshoheit) and the rights to benefit (Ertragshoheit). With this in mind Communes are not only Cities and Municipalities, but also associations of administrations and administration units.

a) Legal Basis

The legal set-up of communal public finance is comprised in the Local Code of Communal Dues (Kommunalabgabengesetz) of the particular Federal State, e. g. the Local Code of Communal Dues for the Free State of Bavaria (Bayerisches Kommunalabgabengesetz), in the following BayKAG),[2] which contains authorisations for by-laws concerning local charges (Gebühren) and shares (Beiträge). Moreover, also special laws like the German Statutory Code on Construction and Building (Baugesetzbuch), in the following BauGB) can constitute a legal basis.

b) Types of Communal Dues

Besides taxes (Steuern) like real estate and local business tax communal dues are charges (Gebühren) and shares (Beiträge).

aa) Taxes

In accordance with § 3 section 1 of the General Fiscal Law (Abgabenordnung), in the following AO), taxes are all cash benefits, which do not represent a quid pro quo for certain performances and which are inflicted to every individual by a public legal community for achieving revenues which are linked with the statutory duty to indemnify (gesetzliche Leistungspflicht). In contrast to other revenues, taxes do not constitute consideration but only make up for covering the general monetary requirements.[3]

bb) Charges

Charges can only be claimed if a citizen in fact makes demands on a certain public service. For trade and repair businesses these are for example charges for the use of water, the use of drains and street-cleaning.

cc) Shares

There merely must be the possibility for the person concerned to make a demand for a public service in order to entitle the Commune to claim shares. Among others there are shares for the provision of infrastructure (Erschließungsbeiträge, §§ 127 et seqq. BauGB), shares for water supply (Art. 5 BayKAG) and shares for dewatering (Art. 5 BayKAG).

2. The Rule of Precedence

At least in principle the Federal States have the obligation to provide Municipalities with adequate funds, e. g. by making accessible certain sources of revenue.[4] To which types of revenues Municipalities can go back in detail is e.g. in Bavaria set out in Art. 62 of the Local Government Code of the Free State of Bavaria (Bayerische Gemeindeordnung), in the following BayGO.[5] Art. 62 BayGO establishes a certain rule of precedence. Thereby particular covering resources (besondere Deckungsmittel), general covering resources (allgemeine Deckungsmittel) and loans (Kredite) are prescribed.

a) Particular Covering Resources

Particular covering resources are further differentiated between miscellaneous revenues (sonstige Einnahmen) and charges for efficiency (Leistungsentgelte).

aa) Miscellaneous Revenues

In accordance with Art. 62 (2) BayGO, Municipalities must hark back to miscellaneous revenues first before they impose dues. These are allocations of funds within schemes of financial compensation (Finanzausgleich) or by means of particular statutes as well as income from assets and capital.[6]

bb) Charges for Efficiency

The second possibility for Communes to receive the necessary revenues for fulfilling their tasks, are charges for efficiency, Art. 62 (2) No. 1 BayGO. In this category belong charges (for administration or employment and contributions as well as fees under private law for actions of public bodies under private law.[7]

b) General Covering Resources

As per Art. 62 (2) No.2 BayGO, general covering resources mean taxes.

c) Loans

The last possibility for Municipalities to receive the necessary revenues for fulfilling their tasks is loans, Art. 62 (3) BayGO. However, raising of credits is limited to certain purposes and liable to a strict control by the supervisory authorities.[8]

3. A Practical Problem: Cross Border Leasing

It is not uncommon that Municipalities are out of money. Hence, it is not surprising that they are very creative in finding new sources of income, e. g. the so-called Cross Border Leasing. The arrangers of Cross Border Leasing are banks, industrial enterprises and insurance companies and as the case may be their subsidiaries. Among others, their job is to realise worldwide tax reductive finance assets for their parent companies. As credit grantors and debts receiver more banks, in particular Federal State banks subject to public law, come up to the arrangers. Community facilities are leased to a so-called "US Investor" to America for 99 years. US-Law takes effect. Because of the long duration of the contracts, they are classified as transfer of ownership in some Federal States of the United States. This way the "US Investor" becomes owner of the complex, and at the same time the particular commune (allegedly) remains owner as well. In a parallel contract the Commune rents back the respective complex. By means of an option to buy the complex back, the Commune has the possibility to end the contract after 30 years. In the USA the ”Investor” declares the value of the purchased complex as expenditure and receives a reimbursement of tax from the US revenue office. The Commune directly obtains a certain amount of these benefits and binds itself to run the facility in the appointed capacity. In case the complex falls out or is not working to capacity, the ”Investor” can quit the contract and claim for damages.

It is questionable whether the communal politicians who sign off on these leasing deals are aware of what they get involved with. After all, the contracts are based on American Law. These deals of Cross Border Leasing are therefore not as comprehensibly as any local council may think and thus hide a lot of risks.[9]

III. Budget Law

The right to own budget management is part of the constitutional right to local self-administration. This means that communal corporations may themselves decide about financial matters. The respective annual budget is developed by the communal treasurer and adopted by the communal council.

1. Constitutional Provisions

Supreme Principles of Budget Law are the safeguard of the fulfilment of the tasks taking into account the requirements of the macroeconomic balance as well as sparingness and economic efficiency of the budget (cp. Art. 61 BayGO, Art. 55 Bayerische Landkreisordnung (Rural District Code of the Free State of Bavaria, in the following BayLKrO), Art. 53 Bayerische Bezirksordnung (Circuit Code of the Free State of Bavaria, in the following BayBezO).[10] Considering these legally binding and by that supervisory checkable principles, Municipalities still have an essential scope which limits are not exceeded until their actions appear economical unreasonable.[11]

a) Personal Responsibility in Terms of Money

In accordance with Art. 104 a (1) GG the Federation and the Federal States separately bear the costs which arise from executing their tasks. Thus, the responsibility for the expenses adapts to the authority to administrate actions (Verwaltungszuständigkeit) due to Art. 83 et seqq. GG and not to the authority to enact legislation (Gesetzgebungszuständigkeit).[12] The expenses for the fulfilment of a task are imposed on the political subdivision which administrates the respective task.[13]

b) The Burden to Provide Financing

In accordance with Art. 104 a (5) GG, all administrative expenses are without exception imposed on the level which is responsible for the exercise of the particular task.

aa) The Relationship between the Federation and the Federal States

Given the binominal state structure the Federation is only under strict requirements entitled to directly resort to the communal level. Instead, the normal case intended by the Constitution is that the Federation leaves the exercise of tasks to the Federal States.[14]

bb) The Relationship between the Federation/Federal States and the Communes

However, tasks can be devolved to the Communes by both the Federation and the Federal States. The amount of delegated administration in the overall municipal administration is enormous, however no exact quantities can be figured out. The tasks falling under delegated authority are financed by administrative charges in combination with the relevant tasks as well as through lump sum and task-adherent state budget contributions or by own financial means of the Municipalities.[15]

[...]


[1] Gemeindefinanzen in Deutschland, verfassungsrechtliche Grundlagen, available at: http://www.bertelsmann-stiftung.de/bst/de/media/C_Verfassungrecht.pdf,last access September 12th, 2007.

[2] There are different Local Codes of communal dues in the particular Federal States. Here reference is limited to the Local Code of Communal Dues of the Federal State of Bavaria.

[3] Becker/Heckmann/Kempen/Manssen, Öffentliches Recht in Bayern, 3rd edition, 2005, page 202.

[4] Becker/Heckmann/Kempen/Manssen, Öffentliches Recht in Bayern, 3rd edition, 2005, page 201.

[5] There are different Local Government Codes in the particular Federal States. Here reference is limited to the Local Government Code of the Federal State of Bavaria.

[6] Becker/Heckmann/Kempen/Manssen, Öffentliches Recht in Bayern, 3rd edition, 2005, page 201.

[7] Becker/Heckmann/Kempen/Manssen, Öffentliches Recht in Bayern, 3rd edition, 2005, page 202.

[8] Becker/Heckmann/Kempen/Manssen, Öffentliches Recht in Bayern, 3rd edition, 2005, page 202.

[9] For detailed information about Cross Border Leasing see: http://www.bayerische-staatszeitung.de/index.jsp?MenuID=33&year=2003&ausgabeID=3&rubrikID=2&artikelID=393.

[10] Becker/Heckmann/Kempen/Manssen, Öffentliches Recht in Bayern, 3rd edition, 2005, page 208.

[11] Becker/Heckmann/Kempen/Manssen, Öffentliches Recht in Bayern, 3rd edition, 2005, page 208.

[12] Gemeindefinanzen in Deutschland, verfassungsrechtliche Grundlagen, available at: http://www.bertelsmann-stiftung.de/bst/de/media/C_Verfassungrecht.pdf.

[13] Gemeindefinanzen in Deutschland, verfassungsrechtliche Grundlagen, available at: http://www.bertelsmann-stiftung.de/bst/de/media/C_Verfassungrecht.pdf.

[14] Gemeindefinanzen in Deutschland, verfassungsrechtliche Grundlagen, available at: http://www.bertelsmann-stiftung.de/bst/de/media/C_Verfassungrecht.pdf.

[15] See Seewald in: Steiner Besonderes Verwaltungsrecht, 8th edition, 2006, Margin Number 114, Footnote 244.

Excerpt out of 16 pages

Details

Title
Structure of Legal Acts which Determine the Payable Obligations of Municipal Authorities in European Countries
Author
Year
2007
Pages
16
Catalog Number
V169722
ISBN (eBook)
9783640881086
ISBN (Book)
9783640881284
File size
471 KB
Language
English
Tags
structure, legal, acts, determine, payable, obligations, municipal, authorities, european, countries
Quote paper
Wolfgang Tiede (Author), 2007, Structure of Legal Acts which Determine the Payable Obligations of Municipal Authorities in European Countries, Munich, GRIN Verlag, https://www.grin.com/document/169722

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