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21 August 2017

Au­gust 2017 month­ly re­port

Translated abstract of the Federal Ministry of Finance’s August 2017 monthly report

Federal budget trends up to and including July 2017

Trends in the federal budget

 

Actual 2016

Estimated 2017

Actual1 as of
July 2017

Expenditure (€bn)2

310.6329.1192.1

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

+4.3
Revenue (€bn)2316.8322.1183.7

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

+1.4
Tax revenue (€bn)289.0301.0170.6

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

+4.5

Fiscal balance (€bn)

6.2-7.0-8.4

Financing/use of surplus:

-6.27.08.4

Cash resources (€bn)

--46.4

Seigniorage (€bn)

0.30.30.1

Reserve funds balance (€bn)

-6.56.70.0
Net borrowing/current financial market balance3 (€bn)0.00.0-38.1
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 seven months of 2017 stood at €183.7bn, up by 1.4% (€2.5bn) over the same period last year. Tax receipts, which make up the largest share of total revenue, rose by 4.5%. Other revenue declined by 27.5%, mainly because allocations from the Bundesbank’s profits were €2.1bn lower than envisaged in the 2017 budget.

Trends in federal revenue

Actual

2016

Estimated

2017

Actual

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

January to July 2016

January to July 2017

€m

Share
in %

€m

Share

in %

€m

I. Tax revenue

288,99191.2301,02993.5163,256170,645+4.5

Federal share of joint taxes:

235,74774.4246,46976.5134,278141,784+5.6

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

127,46340.2130,18740.470,34775,684+7.6

of which:

  

Wages tax

78,51924.882,93925.842,48545,238+6.5

Assessed income tax

22,8797.223,0267.111,60113,449+15.9

Non-assessed taxes on earnings

9,7313.19,6103.06,6046,676+1.1

Final withholding tax on interest and capital gains

2,6130.82,3060.71,6312,036+24.8

Corporation tax

13,7214.313,2494.18,0268,285+3.2

Value added taxes (VAT)

106,52933.6114,43635.563,18165,258+3.3

Trade tax apportionment

1,7550.61,8460.6750842+12.3

Energy duty

40,09112.739,79612.417,84618,517+3.8

Tobacco duty

14,1864.514,7004.67,5767,478 -1.3

Solidarity surcharge

16,8555.317,4505.49,53010,266+7.7

Insurance tax

12,7634.013,0504.18,8699,196+3.7

Electricity duty

6,5692.16,5302.03,7464,061+8.4

Motor vehicle tax

8,9522.88,9002.85,6235,628+0.1

Nuclear fuel tax

4220.100.0266-6,284X

Spirits duties

2,0720.72,0510.61,2101,229+1.6

Coffee duty

1,0400.31,0500.3589596+1.2

Aviation tax

1,0740.31,1010.3521571+9.6

Supplementary grants to Länder

-9,845-3.1-9,228-2.9-4,803-4,761 -0.9

EU GNI own resources

-19,911-6.3-21,680-6.7-10,929-7,121 -34.8

EU VAT own resources

-4,250-1.3-2,440-0.8-2,479-1,378 -44.4

Grants to Länder for public transport

-8,200-2.6-8,144-2.5-4,321-4,869+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

27,8398.821,0216.517,94013,007 -27.5

Revenue from economic activity

6,8472.25,4681.75,6102,826 -49.6

Interest revenue

3020.13000.1162192+18.5

Loan repayments, holdings, privatisation revenue

2,8900.91,8000.61,826886 -51.5

Total revenue1

316,829100.0322,051100.0181,195183,652+1.4
1 Excluding revenue from internal offsetting.
Source: Federal Ministry of Finance

Expenditure trends

Federal expenditure in the January–July period totalled €192.1bn, up by 4.3% (€8bn) on the year.

Federal spending is separated into consumption and investment expenditure. Consumption expenditure was up by 4.1% in year-on-year terms. In particular, human resources spending saw an above-average increase of 5.4%. Ongoing grants for public administrations also climbed, posting a year-on-year rise of 6.2%. This was mainly due to a significant increase in ongoing grants to the Länder (up by 7.9% on the year). Spending on subsidies for other areas was higher than in 2016, especially in the areas of pensions and benefits (e.g. unemployment benefit and parental benefit, which were up by 6.3% and 6.6% respectively) and social security. Investment expenditure was up by 7.8% on the year in January–July 2017. This can be attributed to an 17.4% rise in spending on fixed asset investment. Spending on federal financial assistance increased by 4.7% compared with the same period last year, primarily driven by a 22.7% rise in loans and guarantees granted.

Trends in federal expenditure by function

Actual

2016

Estimated

2017

Actual

Year‑on‑year

change in %
(year to date)

January to July 2016

January to

July 2017

m

Share

in %

€m

Share

in %

€m

General public services

72,181 23.277,807 23.640,27641,318+2.6

Economic cooperation and development

7,732 2.58,501 2.64,2673,744 -12.3

Defence

34,613 11.136,620 11.119,43219,636+1.0

Government, central administration

14,580 4.716,326 5.08,6849,429+8.6

Revenue administration

4,507 1.54,560 1.42,4512,589+5.6

Education, science, research, cultural affairs

21,472 6.923,935 7.310,96911,020+0.5

Support for school and university students and training programme participants

3,516 1.13,977 1.22,0042,022+0.9

Science, research and development outside of higher education institutions

11,406 3.712,729 3.94,9545,070+2.3

Social security, family and youth affairs, labour market policy

160,593 51.7170,486 51.898,369104,193+5.9

Social insurance including unemployment insurance

106,939 34.4111,943 34.068,48571,663+4.6

Labour market policy

34,566 11.137,057 11.319,35421,601+11.6

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

20,349 6.621,000 6.412,11112,873+6.3

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

5,384 1.76,500 2.02,8823,777+31.0

Family assistance, welfare services, etc.

8,065 2.68,275 2.54,8154,862+1.0

Social benefits for the consequences of war and political events

2,026 0.72,111 0.61,2411,239 -0.2

Health, environment, sport, recreation

2,074 0.72,324 0.79951,073+7.8

Housing, regional planning and local community services

2,427 0.83,324 1.01,4821,725+16.4

Housing, home ownership savings premium

1,866 0.62,378 0.71,3391,569+17.1

Food, agriculture and forestry

900 0.31,250 0.4300345+14.8

Energy and water supply, trade and services

4,252 1.46,039 1.82,7602,692 -2.4

Regional support measures

719 0.21,585 0.5356356 -0.0

Mining, manufacturing and construction

1,705 0.51,546 0.51,4881,301 -12.6

Transport and communication

18,313 5.920,818 6.38,7089,862+13.2

Roads

8,660 2.89,154 2.83,8514,316+12.1

Railways and public transport

5,623 1.86,420 2.02,6442,867+8.4

Financial management

35,232 11.323,117 7.021,06220,012 -5.0

Interest expenditure

17,501 5.618,471 5.615,78415,373 -2.6

Total expenditure1

310,581100.0329,100 100.0184,055192,054+4.3
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

July 2016

January to

July 2017

€m

Share
in %

€m

Share
in %

€m

Consumption expenditure

277,39889.3295,96989.9169,770176,656+4.1

Personnel expenditure

30,6659.931,9889.718,23519,211+5.4

Salary payments

22,2697.223,4337.113,04113,778+5.7

Pensions

8,3962.78,5552.65,1945,432+4.6

Current material expenditure

26,1328.428,9578.813,23313,549+2.4

Non-personnel expenditure

1,5060.51,5420.5761796+4.6

Military procurement

9,9633.211,2583.44,8414,330 -10.6

Other

14,6624.716,1574.97,6318,423+10.4

Interest expenditure

17,4985.618,4625.615,78115,370 -2.6

Current grants and subsidies

202,33965.1215,72865.6122,021127,981+4.9

to public administration

23,6487.626,8248.212,82613,619+6.2

to other sectors

178,69157.5188,90457.4109,194114,363+4.7

including:

  

Private enterprises

26,8788.730,0449.115,30315,882+3.8

Pensions, assistance etc.

28,9579.329,8939.117,32218,103+4.5

Social insurance funds

112,57736.2116,87835.571,31074,655+4.7

Other asset transfers

7640.28340.3500546+9.2

Investment expenditure

33,18310.736,07111.014,28515,397+7.8

Financial assistance

24,3587.826,0357.910,80911,316+4.7

Grants and subsidies

22,7877.322,6396.99,96110,452+4.9

Loans, guarantees

1,0690.31,9270.6529649+22.7

Acquisition of holdings; capital contributions

5010.21,4690.4320215 -32.8

Fixed asset investment

8,8252.810,0373.03,4764,081+17.4

Construction measures

6,8462.27,5332.32,6483,086+16.5

Acquisition of movable assets

1,4800.51,8460.6586733+25.1

Acquisition of real property

4990.26580.2242262+8.3

General reduction/increase in expenditure

00.0-2,940-0.900X

Total expenditure1

310,581100.0329,100100.0184,055192,054+4.3
1 Excluding expenditure from internal offsetting.
Source: Federal Ministry of Finance

Fiscal balance

Expenditure exceeded revenue by €8.4bn in the first seven months 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 fiscal balance and net borrowing figures.

Trends in general government tax revenue

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

2017

July

Year‑on‑year
change

January to

July

Year‑on‑year
change

2017 estimates4

Year‑on‑year
change

in €m

in %

in €m

in %

in €m

in %

Joint taxes

      

Wages tax2

16,904+4.7110,468+6.2194,250+5.1

Assessed income tax

-187X31,647+15.957,500+6.8

Non-assessed taxes on earnings

4,215+47.013,436 -1.619,450+0.0

Final withholding tax on interest and capital gains

484+11.74,649+23.76,548+10.2

Corporation tax

187 -35.116,570+3.227,080 -1.3

Value added taxes (VAT)

18,927+9.5130,672+5.0227,550+4.8

Trade tax apportionment

937+4.42,318+12.34,658+9.9

Increased trade tax apportionment

937+6.32,053+11.33,879+7.9

Total joint taxes

42,404+9.9311,814+6.4540,915+4.7

Federal taxes

Energy duty

3,614+7.418,517+3.840,200+0.3

Tobacco duty

1,207+68.87,478 -1.314,190+0.0

Spirits duty incl. alcopops duty

174+1.91,228+1.62,070 -0.0

Insurance tax

665+1.79,196+3.713,200+3.4

Electricity duty

531 -2.84,061+8.46,600+0.5

Motor vehicle tax

718 -6.55,628+0.19,000+0.5

Aviation tax

102+20.8571+9.51,125+4.8

Nuclear fuel duty

0X-6,284X0X

Solidarity surcharge

1,133+4.810,266+7.717,600+4.4

Other federal taxes

109 -2.0826+1.01,458 -0.0

Total federal taxes

8,254+7.651,486 -8.1105,443+1.0

Länder taxes

Inheritance tax

441 -9.63,620 -18.56,010 -14.2

Real property transfer tax

1,089+11.07,578+6.012,730+2.6

Betting and lottery tax

135 -1.01,100+5.91,870+3.4

Beer duty

68+3.3385 -0.8671 -1.0

Other Länder taxes

24+15.1315+5.0453+2.6

Total Länder taxes

1,757+3.812,998 -2.421,734 -2.7

EU--European Union own resources

Customs duty

424+0.52,929+0.15,200+1.7

VAT-based own resources

197 -38.21,378 -44.42,450 -42.4

GNI-based own resources

1,694+1.87,124 -34.818,200 -8.6

Total EU own resources

2,315 -3.711,431 -30.025,850 -11.7

Federation3

22,811+11.7171,024+4.5308,028+6.6

Länder3

24,637+8.5171,377+5.5294,824+2.1

EU

2,315 -3.711,431 -30.025,850 -11.7

Local authorities’ share of income tax and value added tax

3,075+8.725,394+10.744,590+7.8

Total tax revenue (excluding local authority taxes)

52,839+9.2379,227+3.8673,292+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 July 2017

Total tax revenue (excluding local authority taxes) recorded a sharp year-on-year gain of 9.2% in July 2017. This is mainly due to a 9.9% rise in revenue from joint taxes, to which value added taxes, non-assessed taxes on earnings, and wages tax all contributed. However, the increase in receipts from value added taxes was skewed positively by a one-off effect in July last year. Temporal shifts from June to July 2017 in revenue from non-assessed taxes on earnings should also be taken into account. A higher yield from energy duty and overstated revenues from tobacco duty (owing to baseline effects) resulted in a 7.6% increase in receipts from taxes accruing solely to the Federation. Revenues from taxes accruing solely to the Länder rose by 3.8%: the rise in receipts from real property transfer tax more than compensated for lower inheritance tax receipts.

EU own resources

Payments of own resources to the EU, including customs duties, fell by 3.7% in July 2017 compared with the same month last year. A substantial cumulative drop of 30.0% was registered for the January–July period. Transfers have declined sharply this year 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 financing needs at any given time.

Overview of the January–July 2017 period

Total tax receipts increased by 3.8% on the year in the first seven months of 2017. This was driven mainly by a cumulative rise of 6.4% in revenue from joint taxes. Yields from taxes accruing solely to the Federation and from taxes accruing solely to the Länder, on the other hand, posted drops of 8.1% and 2.4% respectively.

Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants to the Länder) rose by 11.7% on the year in July 2017. This trend was driven by a marked 9.4% increase in the Federation’s share of revenue from joint taxes as well as by the 7.6% rise in receipts from taxes accruing solely to the Federation. Lower supplementary federal grants to the Länder, which are shown as expenditures in the Federation’s tax revenue calculations, also had a positive impact on the Federation’s receipts. After accounting for supplementary federal grants, the Länder’s tax receipts rose by 8.5%. This was driven by higher receipts from joint taxes (up 10.6%) and federal subsidies for public transport (up 12.7%) as well as by a slight increase in revenue from taxes accruing solely to the Länder (up 3.8%). The local authorities’ share of revenue from joint taxes was up by 8.7% on the year overall.

Joint taxes

Wages tax

The upward trend in wages tax revenue seen in recent months continued in July 2017, albeit at a somewhat slower pace. Sustained positive employment trends and rising wages continue to have a favourable impact on wages tax revenue. The number of persons in employment rose by nearly 400,000 in the first half of 2017. Gross wages tax revenue climbed by 4.2% on the year in July 2017. Cash receipts from this tax increased by 4.7% after deducting child benefit payments, which are financed from wages tax revenue and rose by 2.1% on the year. In cumulative terms, cash receipts from wages tax posted a 6.2% gain in the seven-month period from January to July 2017.

Corporation tax

The positive trend in corporation tax receipts continued. July is a low-yield month for corporation tax, so revenue was mainly generated from assessment activities. Prepayments of assessed income tax for preceding years increased, while back payments remained unchanged and refunds following completed audits rose. Overall, gross receipts from corporation tax fell by 37.1% to approximately €0.2bn. The deduction of investment allowance payments had only an insignificant impact on cash receipts. Total cash receipts from corporation tax over the January–July 2017 period were up by 3.2%. However, a high volume of corporation tax refunds is still expected over the course of 2017 as a result of high court rulings (Federal Fiscal Court rulings on the STEKO case and section 40a of the Capital Investment Companies Act).

Assessed income tax

As with corporation tax, revenue trends from assessed income tax were driven by assessment activities. There were no significant changes in the balance between prepayments, back payments and refunds (excluding employee refunds). Gross receipts from assessed income tax saw a slight decline of about €0.1bn ( 6.4%) and stood at approximately €1.3bn. Refunds made to employees assessed for income tax dropped by 7.2%. 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 remained unchanged at last year’s level. On a cumulative basis, they rose by 15.9% on the year in the January–July period.

Non-assessed taxes on earnings

Taxes on dividend distributions by corporations are the main source of revenue in the category of non-assessed taxes on earnings. Following a 50.4% decline in June, gross revenue from non-assessed taxes on earnings rose by 45.3% on the year in July. This is presumably a result of a June-to-July shift in the scheduling of dividend distributions. Refunds paid out by the Federal Central Tax Office, which are subtracted from revenue totals, were up by 7.0%. Overall, cash receipts from non-assessed taxes on earnings posted substantial year-on-year growth of 47.0% in July. Cumulative cash receipts from non-assessed taxes on earnings in the first seven months of 2017 were down by 1.6% on the year.

Final withholding tax on interest and capital gains

Revenue from withholding tax on interest and capital gains posted a year-on-year gain of 11.7% in July 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 and 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 it is not possible to provide reliable information on this question. In cumulative terms, revenue from final withholding tax on interest and capital gains rose by 23.7% on the year in the first seven months of 2017.

Value added taxes

Revenue from value added taxes posted a substantial increase of 9.5% in July 2017. Receipts from domestic VAT rose by 11.1%, while the yield from import VAT was up by 4.8%. Although the VAT result for July 2017 was skewed positively by a special case affecting last year’s figure, the yield from value added taxes nevertheless recorded a considerable gain of 6.0% after adjustment for this case. For the entire period from January to July 2017, value added tax revenue increased by 5.0%.

Taxes accruing to the Federation

Receipts from taxes accruing solely to the Federation were up by 7.6% on the year in July 2017. Revenue gains were posted for energy duty (+7.4%), tobacco duty (+68.8%), solidarity surcharge (+4.8%) and insurance tax (+1.7%), while revenue drops were registered for motor vehicle tax ( 6.5%) and electricity duty ( 2.8%). The increase in tobacco duty revenue is overstated as a result of a low baseline figure from 2016. Taken cumulatively, receipts from taxes accruing solely to the Federation dropped by 8.1% on the year in the first seven months of 2017. The reason for this decline is 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. Tax collected on the basis of this law was therefore paid back in June, and tax revenues took a €6.3bn hit as a result.

Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder were up by 3.8% on the year in July 2017. While revenue from real property transfer tax posted gains of 11.0%, inheritance tax receipts declined by 9.6%. Cumulative receipts from taxes accruing to the Länder in January–July 2017 were 2.4% below last year’s figure. This can be attributed to the fall in inheritance tax yields, which had benefited from several big inheritance cases in 2016.

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