The Public Revenue Sharing Scheme as a Budget Policy Tool

The public revenue sharing scheme regulates the distribution of tax revenues among the federal, state and local governments and that of transfers from the federal level. As a consequence of the centralised tax revenue system it is the central financing source for the state and local authorities. With the establishment of the intra-Austrian Stability Pact, the scheme is set to gain even more importance. While the new revenue sharing law has had little effect on the structure of financial relations between territorial authorities, it nevertheless directs additional tax revenues to the federal government and at the same time strengthens the financial position of the smaller communities. Reduced use of the earmarking practice widens the financial leeway of the state and local governments. Nevertheless, the new scheme still falls short of focusing on the responsibilities and performance rates of each level of government.