Conflicting Institutional Pressures During the Establishment of Tax Administrations in the Post-1990 Eastern German States

The reunification of Germany in 1990 has been extensively analysed, yet little knowledge exists on how this critical period has impacted Germany’s system of tax administration. Drawing upon document analysis and semi-structured interviews with experts who were personally involved in the transition, this article investigates the key challenges faced during the establishment of tax administration infrastructures in the post-1990 eastern German states. Specifically, the article compares the transition process in two eastern German states, Saxony and Saxony-Anhalt, thereby illuminating how early administrative design choices explain subsequent differences between these states in their post-1990 tax administration performance. The article employs an historical institutional perspective, combined with an isomorphic institutional analysis, demonstrating that the institutional configuration of Germany’s system of tax administration is central to understanding the performance of eastern German tax administrations post-reunification. Conflicting interests between government actors, both vertically and horizontally, resulted in different views as to how the eastern German states’ tax systems should be developed. Whilst the reunification brought these institutional tensions to the surface in a uniquely clear manner, these tensions continue to affect Germany's present tax administration, making this study important from a historical perspective but also to better understand Germany’s contemporary system of fiscal administration.