Reform of Fiscal Equalisation in Austria: Stronger Reference to Regional and Municipal Tasks

The current system of fiscal equalisation mainly allocates revenues from federal taxes to the community based on the population size indicator. This method does not sufficiently take into account the special charges that fall upon the Länder and municipalities as a result of their tasks. Additional indicators reflecting demographic, socio-economic, geographical and topographical conditions would be of use. In examining the tasks carried out at the level of the Länder and municipalities, one finds that these are significantly influenced by existing structures. In particular, demographic and socio-economic influences have a significant impact on the resources required. In international comparison, many countries base their fiscal equalisation on criteria that go beyond the size of the population.