Financing governmental tasks - Vienna as part of the Republic of Austria

The Act Governing Constitutional Rules on Public Finance provides the fundamental instrument for the distribution of financial competencies between the federal state, the provinces and the municipalities.

Distribution of tax revenues

As a rule, taxes are classified according to which regional authority (federal state, provinces, municipalities) is entitled to dispose of tax revenues in its budget. The main groups are:

• Duties collected at the federal level for the federal budget only
• Federal taxes divided between the state and the provinces, and subsequently allocated to the municipalities based on a quota system (percentages)
• Exclusively provincial or municipal taxes, revenues of which are for provincial or municipal budgets only

In addition, both the federal state and the provinces have the right to introduce new taxes. Municipalities have the right to charge certain dues or taxes by decree. This is part of the "right to independent resolutions" granted to municipalities by federal or provincial law.

Financial equalisation

The system of financial equalisation provides for the distribution of taxation rights and tax revenues between the federal state, the federal provinces and the municipalities of Austria. As the Federal Act on Financial Equalisation has a limited term of validity (usually four to six years), it needs to be renegotiated between representatives of the federal, provincial and municipal levels at regular intervals. The negotiations lead to the conclusion of a "pact" on the terms of financial equalisation. This system is of particular importance for local authorities because it accounts for a significant share of their total revenues.

Apart from the allocation of taxation rights (i.e. determining which authority is entitled to levy a certain tax) and the distribution of joint tax revenues (primary financial equalisation), the system of financial equalisation in Austria also provides for supplementary grants from one local authority level to the other (secondary financial equalisation), e.g. to help finance specific tasks, relieve financial hardship or cover extraordinary expenses.