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7 November 2013

Taxation

Work­ing Par­ty on Tax Rev­enue Es­ti­mates de­liv­ers lat­est fig­ures (Novem­ber 2013)

Federal, Länder and municipal governments can continue to expect a moderate rise in tax receipts in the coming years, according to the most recent tax revenue estimates. The latest figures show only slight differences compared with the previous estimates in May 2013, as aggregate economic conditions have changed little in the meantime. At its 143rd meeting, held in the city of Bremerhaven, the Working Party on Tax Revenue Estimates forecast that tax receipts would total 620.5bn this year and increase to roughly €731.5bn by 2018.

Martin Kotthaus, spokesperson of the Federal Minister of Finance, Dr. Wolfgang Schäuble, Federal Minister of Finance, and Werner Gatzer, State Secretary at the Federal Ministry of Finance
Source:  Federal Ministry of Finance, Jörg Rüger

These positive results reflect the sustained favourable economic conditions and high employment levels in Germany, which are boosting business and household income and profits. Domestic demand remains robust and is serving as a key growth driver. Viewed from an international perspective, Germany’s economic fundamentals remain strong.

Commenting on the Working Party’s findings, Minister Schäuble stated: "The revenue base of the federal, Länder and municipal governments will remain solid in coming years. A sustainably balanced federal budget is within our grasp. The fiscal policy path we are pursuing is successful. The crucial factor here is to have strong economic fundamentals in place that foster sound growth and high levels of employment. This leads, among other things, to positive tax revenue trends. However, the Working Party’s findings also show that we have limited leeway for additional spending."

Basis for estimating tax revenue

The tax revenue estimate is based on the macroeconomic benchmark figures contained in the German government’s autumn projection. As in the spring, the autumn projection anticipates real GDP growth of 0.5% in 2013. For the forecast period from 2013 to 2018, the government expects nominal GDP growth rates of 2.6% in 2013, 3.3% in 2014, and 3.0% for the years from 2015 to 2018.

Current expectations regarding the development of gross wages and salaries – a crucial factor for estimating tax revenue – have changed little over the course of 2013. The autumn projection now predicts that total wages and salaries will increase by 3.1% in 2013 (a downward adjustment of 0.2 percentage points compared with the spring projection), while the estimates for the years 2014–2018 are all 0.1 percentage point higher than forecast in spring. Starting in 2014, business and property income is expected to grow at a marginally slower rate than originally forecast in May 2013.

The tax revenue estimate is based on current tax law.

November’s estimate of total tax revenue for 2013 is up €5.3bn from the estimate made six months ago. This breaks down into €1.3bn more in tax revenue for the federal government, €2.4bn more for Länder governments, and €1.1bn more for municipal governments.

November’s estimates for the years from 2014 to 2018 have also been adjusted upwards since May, although the impact of these adjustments varies depending on government level. Compared with May 2013, the latest estimates for total tax revenue are up by €1.9bn for 2014 (federal government: +€0.3bn), €1.9bn for 2015 (federal government: –€0.2bn), €2.6bn for 2016 (federal government: +€0.3bn), and €2.3bn for 2017 (federal government: –€0.1bn).

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