It has traditionally been one of the main political issues in Germany whether the current intergovernmental resource allocation system between the state and its municipalities works well, and whether the distributive mechanism of unconditional grants sufficiently cover the local expenditure needs. This research project aims at examining the justification of current unconditional grants made in the context of the municipal fiscal equalisation system in Saxony. Two major research aspects are:
The major outcome of the study and the derived recommendations for system changes would be then reflected in the preparation of the law on municipal fiscal equalisation system for 2005/6.
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