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How capable is the state of taking action? Only 18 percent of local government finance officials in North Rhine-Westphalia consider their municipality fully capable of acting. Inadequate funding and excessive regulation are seen as the main obstacles. Accordingly, there is a substantial need for reform at all levels of government, while the willingness to embrace change is perceived to be limited. In addition to the financial situation, investment and climate protection, the 2026 NRW.BANK.Fokus Kommunen survey focuses in particular on modernising the state.

In Germany, tax expenditures totalling over 77 billion euros are being granted this year. How much more is anyone's guess. In the first-ever Tax Expenditure Country Report on Germany, Christian von Haldenwang (IDOS, Bonn) and Michael Thöne (FiFo, Cologne) analyse the merits and shortcomings of the German system of tax expenditures. Compared to international best practices, the overly narrow definitions and resulting transparency gaps, the incomplete quantification and erratic evaluation culture are particularly problematic. The report is presented publicly in Berlin on 8 October 2026, with the support of CEP Zurich, and is published simultaneously in English and German. The press release dated 12 October 2026 summarises the key points from the event.

In a new study commissioned by the Federal Environment Agency (UBA) FiFo-researchers use improved data sets to quantify the tax benefits enjoyed by company car users under the so-called ‘1 per cent rule’. For 2024, the blanket rule is associated with a shortfall in tax revenue of 4.2 billion euros, as well as approximately 1.68 million tonnes of additional CO₂ emissions. The study represents a methodological improvement by examining the effects of vehicle provision and use separately. From a tax policy perspective, the move to a '1.7 per cent rule' is recommended.

Green budgeting – aligning budgetary policy with climate and environmental goals – is rising up the agenda at EU, national and subnational levels, and the challenge is increasingly practical. FiFo-Köln, as technical expert, has accompanied the development of a practical green budgeting tagging methodology for Baden-Württemberg*. The policy brief “Green budget tagging in practice” outlines the approach taken in Baden-Württemberg alongside equivalent methods in two other European administrations: the Italian Region of Lombardy, and Greece. Its core message is clear: green budget tagging is not a one-off technical exercise but a multi-cycle reform process.
*Project funded by the European Union via the Technical Support Instrument and implemented by Expertise France in cooperation with the European Commission

The impending collapse of German municipal financesis due to rising expenditure, particularly on services such as youth welfare, integration support and care assistance. In accordance with the principle of causal connectivity – ‘who orders, pays’ – there are frequent calls for better federal funding of these municipal services, which are determined at central government level. In a new FiFo Discussion Paper, Michael Thöne examines solutions based on the ‘who orders, pays’ principle and on the principle of ‘who implements, pays’. As neither promises a sustainable solution, he recommends considering the complete centralisation of these services. Shifting the responsibility for implementation upwards too would, in practice, be significantly less demanding than it appears at first glance.