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20 July 2017

Ju­ly 2017 month­ly re­port

Translated abstract of the Federal Ministry of Finance's July 2017 monthly report

Federal budget trends up to and including June 2017

Trends in the federal budget

 

Actual 2016

Estimated 2017

Actual1 as of
June 2017

Expenditure (€bn)2

310.6329.1157.6

Year-on-year change in % (year to date)

+4.6
Revenue (€bn)2316.8322.1156.2

Year-on-year change in % (year to date)

+0.4
Tax revenue (€bn)289.0301.0146.5

Year-on-year change in % (year to date)

+3.7

Fiscal balance (€bn)

6.2-7.0-1.4

Financing/use of surplus:

-6.27.01.4

Cash resources (€bn)

--34.9

Seigniorage (€bn)

0.30.30.1

Reserve funds balance (€bn)

-6.56.70.0
Net borrowing/current financial market balance3 (€bn)0.00.0-33.6
1 As per accounts.
2 Excluding revenue and expenditure from internal offsetting.
3 (-) Debt repayment; (+) Borrowing
Source: Federal Ministry of Finance

Revenue trends

Federal revenue in the first half of 2017 stood at €156.2bn, up by 0.4% (€0.6bn) over the same period last year. This means that 49% of planned revenues for 2017 were generated during this period. Tax receipts rose by 3.7% on the year and thus recorded weaker growth than in the previous months. This can be attributed to the fact that €6.3bn worth of nuclear fuel duty had to be paid back to energy supply companies following the Federal Constitutional Court’s ruling of 13 April 2017 (official publication: 7 June 2017). The associated interest payments are not included in this figure. Other revenue was well below the previous year’s level (down by 32%). This was mainly because allocations from the Bundesbank’s profits were €2.1bn lower than envisaged in the 2017 federal budget.

Trends in federal revenue

Actual

2016

Estimated

2017

Actual

Year‑on‑year
change in %
(year to date)

January to June 2016

January to June 2017

€m

Share
in %

€m

Share

in %

€m

I. Tax revenue

288,99191.2301,02993.5141,265146,479+3.7

Federal share of joint taxes:

235,74774.4246,46976.5117,358123,286+5.1

Revenue from personal and corporate income taxes (incl. final withholding tax on interest and capital gains)

127,46340.2130,18740.461,78066,208+7.2

of which:

  

Wages tax

78,51924.882,93925.835,60138,045+6.9

Assessed income tax

22,8797.223,0267.111,69313,530+15.7

Non-assessed taxes on earnings

9,7313.19,6103.05,1424,610 -10.3

Final withholding tax on interest and capital gains

2,6130.82,3060.71,4621,832+25.3

Corporation tax

13,7214.313,2494.17,8818,191+3.9

Value added taxes (VAT)

106,52933.6114,43635.555,09556,505+2.6

Trade tax apportionment

1,7550.61,8460.6483572+18.4

Energy duty

40,09112.739,79612.414,48114,903+2.9

Tobacco duty

14,1864.514,7004.66,8616,271 -8.6

Solidarity surcharge

16,8555.317,4505.48,4499,133+8.1

Insurance tax

12,7634.013,0504.18,2158,530+3.8

Electricity duty

6,5692.16,5302.03,2003,530+10.3

Motor vehicle tax

8,9522.88,9002.84,8554,910+1.1

Nuclear fuel tax

4220.100.094-6,284

Spirits duties

2,0720.72,0510.61,0391,055+1.5

Coffee duty

1,0400.31,0500.3506518+2.4

Aviation tax

1,0740.31,1010.3436468+7.3

Supplementary grants to Länder

-9,845-3.1-9,228-2.9-4,803-4,761 -0.9

EU GNI own resources

-19,911-6.3-21,680-6.7-9,265-5,427 -41.4

EU VAT own resources

-4,250-1.3-2,440-0.8-2,160-1,181 -45.3

Grants to Länder for public transport

-8,200-2.6-8,144-2.5-3,704-4,174+12.7

Grants to Länder for motor vehicle tax and HGV toll

-8,992-2.8-8,992-2.8-4,496-4,496+0.0

II. Other revenue

27,8398.821,0216.514,3329,751 -32.0

Revenue from economic activity

6,8472.25,4681.74,9871,963 -60.6

Interest revenue

3020.13000.190117+30.0

Loan repayments, holdings, privatisation revenue

2,8900.91,8000.6505189 -62.6

Total revenue1

316,829100.0322,051100.0155,597156,231+0.4
1 Excluding revenue from internal offsetting.
Source: Federal Ministry of Finance

Expenditure trends

Federal expenditure in the first half of 2017 totalled €157.6bn, up by 3.9% (€7bn) on the year. This represents 48% of the projected expenditure for 2017.

Federal spending is separated into consumption and investment expenditure. Consumption expenditure was up by 4.8% in year-on-year terms. In particular, human resources spending rose by 5.2% and operating expenditure by 7.4%, both above-average increases. Ongoing grants for public administrations also climbed, posting a year-on-year increase of 7.4%. This was mainly due to a significant rise in ongoing grants to the Länder (up by 9.8% on the year). Spending on subsidies for other areas was higher than in the first half of 2016, particularly in the areas of pensions and benefits (e.g. unemployment benefit and parental benefit, which were up by 6.5% and 7.0%, respectively) and social security. The 5.6% (€0.4bn) year-on-year rise in interest expenditure also contributed to the increase in consumption expenditure. Investment expenditure in the first half of 2017 was up by 2.0% on the year. This can be attributed to an 11.8% rise in spending on fixed asset investment. On the other hand, lower expenditure on federal financial assistance dampened the increase in investment spending.

Trends in federal expenditure by function

Actual

2016

Estimated

2017

Actual

Year‑on‑year

change in %
(year to date)

January to June 2016

January to

June 2017

m

Share

in %

€m

Share

in %

€m

General public services

72,181 23.277,807 23.634,41535,319+2.6

Economic cooperation and development

7,732 2.58,501 2.63,6473,127 -14.2

Defence

34,613 11.136,620 11.116,42216,869+2.7

Government, central administration

14,580 4.716,326 5.07,5498,270+9.5

Revenue administration

4,507 1.54,560 1.42,0932,206+5.4

Education, science, research, cultural affairs

21,472 6.923,935 7.39,1659,066 -1.1

Support for school and university students and training programme participants

3,516 1.13,977 1.21,7641,835+4.0

Science, research and development outside of higher education institutions

11,406 3.712,729 3.94,1344,205+1.7

Social security, family and youth affairs, labour market policy

160,593 51.7170,486 51.884,60389,604+5.9

Social insurance including unemployment insurance

106,939 34.4111,943 34.059,46162,243+4.7

Labour market policy

34,566 11.137,057 11.316,56718,386+11.0

of which: Unemployment benefit II under Book II of the Social Code

20,349 6.621,000 6.410,41311,087+6.5

Unemployment Benefit II, government housing and heating allowances under Book II of the Social Code

5,384 1.76,500 2.02,4543,105+26.5

Family assistance, welfare services, etc.

8,065 2.68,275 2.54,1364,189+1.3

Social benefits for the consequences of war and political events

2,026 0.72,111 0.61,0731,094+2.0

Health, environment, sport, recreation

2,074 0.72,324 0.7838917+9.4

Housing, regional planning and local community services

2,427 0.83,324 1.01,1171,315+17.7

Housing, home ownership savings premium

1,866 0.62,378 0.79951,181+18.8

Food, agriculture and forestry

900 0.31,250 0.4244285+16.8

Energy and water supply, trade and services

4,252 1.46,039 1.82,4362,187 -10.2

Regional support measures

719 0.21,585 0.5145161+11.0

Mining, manufacturing and construction

1,705 0.51,546 0.51,4671,252 -14.7

Transport and communication

18,313 5.920,818 6.36,9807,584+8.7

Roads

8,660 2.89,154 2.82,9213,205+9.7

Railways and public transport

5,623 1.86,420 2.02,2122,200 -0.5

Financial management

35,232 11.323,117 7.011,71211,516 -1.7

Interest expenditure

17,5015.618,471 5.67,0347,428+5.6

Total expenditure1

310,581100.0329,100 100.0150,661157,624+4.6
1 Excluding expenditure from internal offsetting.
Source: Federal Ministry of Finance
Trends in federal expenditure by economic category

Actual

2016

Estimated

2017

Actual

Year‑on‑year

change in %
(year to date)

January to

June 2016

January to

June 2017

€m

Share
in %

€m

Share
in %

€m

Consumption expenditure

277,39889.3295,96989.9139,194145,922+4.8

Personnel expenditure

30,6659.931,9889.715,77716,595+5.2

Salary payments

22,2697.223,4337.111,25311,865+5.4

Pensions

8,3962.78,5552.64,5254,730+4.5

Current material expenditure

26,1328.428,9578.810,80511,605+7.4

Non-personnel expenditure

1,5060.51,5420.5660690+4.5

Military procurement

9,9633.211,2583.43,7263,610 -3.1

Other

14,6624.716,1574.96,4197,305+13.8

Interest expenditure

17,4985.618,4625.67,0327,426+5.6

Current grants and subsidies

202,33965.1215,72865.6105,132109,806+4.4

to public administration

23,6487.626,8248.210,59611,375+7.4

to other sectors

178,69157.5188,90457.494,53698,431+4.1

including:

  

Private enterprises

26,8788.730,0449.113,03913,272+1.8

Pensions, assistance etc.

28,9579.329,8939.114,91315,632+4.8

Social insurance funds

112,57736.2116,87835.561,89064,788+4.7

Other asset transfers

7640.28340.3447491+9.8

Investment expenditure

33,18310.736,07111.011,46711,702+2.0

Financial assistance

24,3587.826,0357.98,6858,593 -1.1

Grants and subsidies

22,7877.322,6396.97,8958,075+2.3

Loans, guarantees

1,0690.31,9270.6469405 -13.6

Acquisition of holdings; capital contributions

5010.21,4690.4320113 -64.7

Fixed asset investment

8,8252.810,0373.02,7823,109+11.8

Construction measures

6,8462.27,5332.32,0702,332+12.7

Acquisition of movable assets

1,4800.51,8460.6497603+21.3

Acquisition of real property

4990.26580.2215174 -19.1

General reduction/increase in expenditure

00.0-2,940-0.900X

Total expenditure1

310,581100.0329,100100.0150,661157,624+4.6
1 Excluding expenditure from internal offsetting.
Source: Federal Ministry of Finance

Fiscal balance

Expenditure exceeded revenue by €1.4bn in the first half of 2017.

Revenue and expenditure are subject to strong fluctuations over the course of the fiscal year and thus have an uneven effect on cash funds in individual months. Net borrowing also tends to fluctuate considerably over the course of the year. This means that the fiscal balance at this point in the year and the corresponding net borrowing figures are not reliable indicators of the end-of-year figures for the fiscal balance and net borrowing.

Trends in general government tax revenue

Current-year trends in tax revenue (excluding local authority taxes)1

2017

June

Year‑on‑year
change

January to

June

Year‑on‑year
change

2017 estimates4

Year‑on‑year
change

in €m

in %

in €m

in %

in €m

in %

Joint taxes

      

Wages tax2

17,319+7.193,564+6.5194,250+5.1

Assessed income tax

13,145+12.731,834+15.757,500+6.8

Non-assessed taxes on earnings

1,990 -52.39,221 -14.519,450+0.0

Final withholding tax on interest and capital gains

466+45.84,164+25.36,548+10.2

Corporation tax

7,041+7.816,383+3.927,080 -1.3

Value added taxes (VAT)

17,878+1.1111,745+4.3227,550+4.8

Trade tax apportionment

-3X1,381+18.44,658+9.9

Increased trade tax apportionment

-3X1,116+15.83,879+7.9

Total joint taxes

57,833+2.3269,410+5.8540,915+4.7

Federal taxes

Energy duty

3,515+2.914,903+2.940,200+0.3

Tobacco duty

1,270+49.56,271 -8.614,190+0.0

Spirits duty incl. alcopops duty

155+1.31,054+1.52,070 -0.0

Insurance tax

657+5.68,530+3.813,200+3.4

Electricity duty

686+62.53,530+10.36,600+0.5

Motor vehicle tax

843+8.54,910+1.19,000+0.5

Aviation tax

95+4.2468+7.31,125+4.8

Nuclear fuel duty

-6,284X-6,284X0X

Solidarity surcharge

2,445+10.99,133+8.117,600+4.4

Other federal taxes

119+11.2717+1.41,458 -0.0

Total federal taxes

3,500 -59.943,232 -10.6105,443+1.0

Länder taxes

Inheritance tax

563 -51.23,179 -19.56,010 -14.2

Real property transfer tax

1,074+7.16,489+5.212,730+2.6

Betting and lottery tax

157+3.5964+7.01,870+3.4

Beer duty

66+1.7318 -1.7671 -1.0

Other Länder taxes

28 -9.9291+4.2453+2.6

Total Länder taxes

1,888 -21.411,241 -3.321,734 -2.7

EU own resources

Customs duty

446+10.72,504+0.05,200+1.7

VAT-based own resources

197+11.21,181 -45.32,450 -42.4

GNI-based own resources

1,663+80.05,431 -41.418,200 -8.6

Total EU own resources

2,306+53.39,116 -34.625,850 -11.7

Federation3

26,074 -18.2148,213+3.4308,028+6.6

Länder3

30,179+0.3146,740+5.1294,824+2.1

EU

2,306+53.39,116 -34.625,850 -11.7

Local authorities’ share of income tax and value added tax

5,107+10.822,319+11.044,590+7.8

Total tax revenue (excluding local authority taxes)

63,666 -6.5326,388+3.0673,292+3.9
1 Methodology: Total cash income from the various taxes is recorded and allocated to the various government levels as stipulated by law. Actual tax amounts collected in the current month by individual government levels may differ from target amounts due to technical reasons.
2 After deduction of child benefit refunds by the Federal Central Tax Office.
3 After supplementary grants; any discrepancies with table on federal revenue are due to methodology used.
4 Working Party on Tax Revenue Estimates, May 2017
Source: Federal Ministry of Finance

Tax revenue in June 2017

Total tax revenue (excluding local authority taxes) recorded a year-on-year decline of 6.5% in June 2017. Receipts from joint taxes were up by 2.3% on the year. This was driven mainly by receipts from wages tax, assessed income tax and corporation tax, the latter two mainly as a result of the continued rise in prepayments for the current year. However, the growth in revenue from joint taxes was slowed by a substantial 52.3% decline in receipts from non-assessed taxes on earnings. Although receipts from the most important federal taxes posted gains, the nuclear fuel duty repayments of €6.3bn had a severe impact on total federal tax revenues, which fell by 59.9%. Taxes accruing to the Länder also took a hit, with yields dropping by 21.4% as a result of a 51.2% decline in inheritance tax revenue.

EU own resources

Payments of own resources to the EU, including customs duties, rose by 53.3% in June 2017 compared with the same month last year. Nevertheless, a considerable cumulative drop of 34.6% was registered for the January–June period. Transfers had declined sharply in the first quarter of 2017 as a result of (a) balances resulting from EU adjustments and amending budgets and (b) the implementation of the EU’s new Own Resources Decision. Overall, it is anticipated that Germany’s transfers of own resources to the EU will be lower this year than in 2016. The amount of the monthly transfers is determined by the EU’s current financing needs.

Cumulative overview of the January–June 2017 period

In the first half of 2017, total tax receipts increased by 3.0% on the year. This was driven by the 5.8% growth in revenue from joint taxes. Federal taxes and Länder taxes both posted drops, falling by 10.6% and 3.3% respectively.

Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants to the Länder) fell by 18.2% on the year in June 2017. The Federation’s share of revenue from joint taxes posted a small increase, but this did little to balance out the strong decline in receipts from federal taxes and the rise in transfers of own resources to the EU from the federal budget. In contrast, the tax receipts of the Länder rose by 0.3% compared with the same period last year. The shortfalls in revenue from Länder taxes were compensated by higher revenues from joint taxes, income from federal subsidies for public transport, and supplementary federal grants, resulting in a slight increase overall. The local authorities’ share of revenue from joint taxes was up by 10.8% on the year overall.

Joint taxes

Wages tax

The upward trend in wages tax revenue seen in recent months continued in June 2017, buoyed by sustained positive employment trends and rising wages. Gross wages tax revenue was up sharply by 6.0% on the year in June 2017. Child benefit payments – which are financed from wages tax receipts and subtracted from the gross figure – increased by 0.9% on the year in June. On balance, cash receipts from wages tax were up by 7.1% in year-on-year terms in June 2017. In cumulative terms, cash receipts from wages tax recorded a sizeable year-on-year gain of 6.5% in the first half of 2017.

Corporation tax

In June, the second corporation tax prepayment instalments for the current year were due. These were up by approximately 9% on the year. The balance between back payments and refunds deteriorated due to higher refunds resulting from completed audits. Overall, gross receipts from corporation tax rose by 7.6% in June 2017. After deduction of investment allowance payments, which continue to decline in terms of volume, cash receipts from corporation tax posted a year-on-year gain of 7.8% in June 2017. A high volume of corporation tax refunds is expected over the course of 2017 as a result of high court rulings (Federal Fiscal Court rulings on the STEKO case and section 40 of the Capital Investment Companies Act). Revenue from corporation tax recorded year-on-year gains of 3.9% in the first half of 2017.

Assessed income tax

As with corporation tax, revenue trends from assessed income tax were driven by prepayments, which rose by about 8%. The balance between back payments and refunds (excluding employee refunds) registered a slight improvement. Gross receipts from assessed income tax increased by 8.0% in June 2017. Refunds made to employees assessed for income tax dropped by 21.4%. Payments of investment allowance and owner-occupied homes premium now have only a slight impact on revenue from assessed income tax. On balance, cash receipts from assessed income tax were up by 12.7% on the year in June 2017. In cumulative terms, cash receipts from assessed income tax increased by 15.7% on the year in the first half of 2017.

Non-assessed taxes on earnings

June 2017 saw a 50.4% year-on-year decline in gross receipts from non-assessed taxes on earnings. Refunds paid out by the Federal Central Tax Office, which are subtracted from revenue totals, rose by 47.3%. This meant that, overall, cash receipts from non-assessed taxes on earnings posted a substantial fall in June, down by 52.3% on the year. Receipts from non-assessed taxes on earnings mainly come from the taxation of dividend distributions by corporations. Because the scheduling of dividend distributions changes from year to year, the monthly yield from non-assessed taxes is subject to strong year-on-year fluctuations. In the first half of 2017, cumulative cash receipts from non-assessed taxes on earnings were up by 14.5% compared with the first half of 2016.

Final withholding tax on interest and capital gains

Revenue from withholding tax on interest and capital gains posted a considerable year-on-year gain of 45.8% in June 2017, continuing the positive trend seen in the last few months. Given the ongoing low interest-rate environment, this cannot be attributed to taxes on interest. It is more likely to be linked to trends in capital gains. It is fair to assume that stock market trends have led many investors to realise profits by selling their shares, resulting in an increased yield from capital gains tax. However, no separate statistics are kept on the two revenue components, so no reliable information can be provided on this question. In cumulative terms, revenue from final withholding tax on interest and capital gains rose by 25.3% on the year in the first half of 2017.

Value added taxes

Growth in receipts from value added taxes had already been relatively weak in recent months (compared with the trends observed over the course of the year to date) and remained moderate in June, up by only 1.1% on the year. However, it should be noted that VAT revenue displays a high level of volatility over the course of the year. Revenue from domestic VAT dropped by 3.4% in year-on-year terms, while receipts from import VAT saw a substantial rise of 15.9%. Taken cumulatively, revenue from value added taxes rose by 4.3% on the year in the first half of 2017.

Taxes accruing to the Federation

Receipts from taxes accruing solely to the Federation were down by 59.9% on the year in June 2017. This sharp decline is linked to the Federal Constitutional Court’s decision of 13 April 2017 (2 Bvl 6/13). The court ruled that the Nuclear Fuel Duty Act is unconstitutional and therefore null and void. As a result, tax collected on the basis of this law had to be paid back. The refunds were carried out in June and amounted to a total of €6.3bn. These refunds had a corresponding negative impact on receipts from taxes accruing to the Federation. However, revenues from other major taxes accruing to the Federation posted good results. Taken by themselves, they recorded gains of more than €1bn. For example, receipts from energy duty were up by 2.9%, the solidarity surcharge posted a 10.9% increase, the yield from tobacco duty grew by 49.5%, and electricity duty revenue rose by 62.5%. In the two latter categories, however, it should be noted that last year’s results were weak. Cumulatively, receipts from federal taxes declined by 10.6% on the year in the first half of 2017.

Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder were down by 21.4% on the year in June 2017. This decline is linked to inheritance tax receipts, which had more than doubled in June last year due to an individual case. As a result, a sharp year-on-year decline of 51.2% was recorded in June 2017. Real property transfer tax, the Länder tax that generates the most revenue, was up by 7.1%. In cumulative terms, revenue from taxes accruing solely to the Länder declined by 3.3% in the first half of 2017 compared to the same period of last year.

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