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5 November 2015

Taxation

2016 fed­er­al bud­get with no new debt thanks to 2015 sur­plus

Results of the 147th meeting of the Working Party on Tax Revenue Estimates

Results of the latest tax revenue estimates

The Working Party on Tax Revenue Estimates predicts that the Federation, Länder and local authorities can expect higher tax revenues over the next few years. In line with the general economic trend, tax revenues will rise from around €671.7bn in 2015 to approx. €795.6bn in 2020. The Working Party convened from 3 to 5 November 2015 for its 147th meeting at the invitation of the Bavarian State Ministry of Finance, Regional Development and Regional Identity.

Finance Minister Wolfgang Schäuble commented that “the German state is in a sound financial position and able to act. This is crucial in light of the challenges facing us. Thanks to the surplus from 2015 we will not, based on present circumstances, need to incur new debts in 2016 either”.

The results of the estimates reflect the state of the persistent, favourable macroeconomic environment in Germany. Companies and households are benefiting from this in terms of rising profits and incomes respectively. Domestic demand is the mainstay of growth. The labour market continues to develop in an encouraging manner. The German businesses are well positioned by international comparison.

Tax revenues for 2015

Tax revenues for 2015 will be €5.2bn higher overall than forecast in the May 2015 estimates. Revenues will be €1.1bn higher for the Federation and €5.1bn higher for the Länder. Revenue expectations for the local authorities have risen by €0.6bn.

Tax revenues for 2016

In 2016, tax revenue is expected to be €5.2bn lower than the May 2015 estimate. The Federation and local authorities are forecast to take €4.9bn and €1.9bn less respectively. However, the Länder are expected to have additional revenues of €3.4bn. The reductions in revenue for the general government arise from changes in tax law which had to be taken into account for the first time in these tax estimates. The changes include legislation increasing the basic tax allowance, child allowance, child benefit and child supplement, as well as the impact of a Federal Fiscal Count ruling on corporate/trade tax rebates for 2001 and 2002. Discounting this, tax revenue for the general government would be €6.3bn higher than expected in May 2015. A reduction in EU payments of €2bn also has a positive effect.

Tax revenues for 2017 to 2019

For the country as whole, tax revenue from 2017 to 2019 will be higher than the May 2015 estimate. The impact on the different layers of government varies. The Federation is forecast to have lower tax receipts by 2019 owing, among other reasons, to the allocation of shares of VAT revenue to the Länder (under legislation to facilitate asylum procedures). Compared with the May tax estimates, federal revenue will be €3.2bn lower in 2017, €2.4bn lower in 2018 and €2.3bn lower in 2019. By contrast, the Länder and local authorities an expect tax revenues in addition to those forecast in May.

About the Working Party

The Working Party on Tax Revenue Estimates is an advisory council at the Federal Ministry of Finance. In addition to the Federal Ministry of Finance, which has lead responsibility, the council’s membership includes the Federal Ministry of Economics and Technology, five economic research institutes, the Federal Statistical Office, the Bundesbank, the German Council of Economic Experts, the finance ministries of the Länder and the Federation of German Local Authority Associations.

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