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23 March 2017

March 2017 month­ly re­port

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

Federal budget trends up to and including February 2017

Trends in the federal budget

 

Actual 20161

Estimated

2017

Actual2 as of
February 2017

Expenditure (€bn)3

310,6

329,1

62,2

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

 

 

+1,4

Revenue (€bn)3

316,8

322,1

49,8

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

 

 

+16,4

Tax revenue (€bn)

289,0

301,0

46,9

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

 

 

+21,0

Fiscal balance (€bn)

6,2

-7,0

-12,3

Financing/use of surplus:

-6,2

7,0

12,3

Cash resources (€bn)

-

-

24,1

Revenue from coin (€bn)

0,3

0,3

-0,2

Transfer to reserve funds (€bn)

-6,5

6,7

0,0

Net borrowing/current financial market balance4 (€bn)

0,0

0,0

-11,6

Revenue trends

Federal revenue totalled around 49.8bn in the January–February 2017 period, representing a rise of 16.4% (+€7.0bn) over the same period in 2016. Tax revenue, which accounts for the largest share of total revenue, was up by 21.0% (+€8.1bn). At €1.1bn, other revenue was only slightly below the 2016 figure.

Trends in federal revenue

Actual

2016

Estimated

2017

Actual

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

January to February 2016

January to February 2017

€m

Share
in %

€m

Share

in %

€m

I. Tax revenue

288,991

91.2

301,029

93.5

38,736

46,870

+21.0

Federal share of joint taxes:

235,747

74.4

246,469

76.5

33,811

35,739

+5.7

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

127,463

40.2

130,187

40.4

13,669

14,637

+7.1

of which:

 

 

 

 

 

 

 

Wages tax

78,519

24.8

82,939

25.8

10,699

11,583

+8.3

Assessed income tax

22,879

7.2

23,026

7.1

610

856

+40.3

Non-assessed taxes on earnings

9,731

3.1

9,610

3.0

936

975

+4.2

Final withholding tax on interest and capital gains

2,613

0.8

2,306

0.7

745

881

+18.3

Corporation tax

13,721

4.3

13,249

4.1

678

342

 -49.6

Value added taxes (VAT)

106,529

33.6

114,436

35.5

20,098

20,997

+4.5

Trade tax apportionment

1,755

0.6

1,846

0.6

43

105

+144.2

Energy duty

40,091

12.7

39,796

12.4

1,695

1,740

+2.7

Tobacco duty

14,186

4.5

14,700

4.6

1,240

1,402

+13.1

Solidarity surcharge

16,855

5.3

17,450

5.4

2,038

2,162

+6.1

Insurance tax

12,763

4.0

13,050

4.1

5,164

5,455

+5.6

Electricity duty

6,569

2.1

6,530

2.0

1,106

1,024

 -7.4

Motor vehicle tax

8,952

2.8

8,900

2.8

1,622

1,617

 -0.3

Nuclear fuel tax

422

0.1

0

0.0

0

0

 

Spirits duties

2,072

0.7

2,051

0.6

434

453

+4.4

Coffee duty

1,040

0.3

1,050

0.3

171

170

 -0.6

Aviation tax

1,074

0.3

1,101

0.3

107

112

+4.7

Supplementary grants to Länder

-9,845

-3.1

-9,228

-2.9

0

0

 

EU GNI own resources

-19,911

-6.3

-21,680

-6.7

-4,090

976

 -123.9

EU VAT own resources

-4,250

-1.3

-2,440

-0.8

-1,169

-433

 -63.0

Grants to Länder for public transport

-8,200

-2.6

-8,144

-2.5

-1,235

-1,391

+12.6

Grants to Länder for motor vehicle tax and HGV toll

-8,992

-2.8

-8,992

-2.8

-2,248

-2,248

X

II. Other revenue

27,839

8.8

21,021

6.5

4,079

2,947

 -27.8

Revenue from economic activity

6,847

2.2

5,468

1.7

45

43

 -4.4

Interest revenue

302

0.1

300

0.1

20

21

+5.0

Loan repayments, holdings, privatisation revenue

2,890

0.9

1,800

0.6

155

51

 -67.1

Total revenue 1

316,829

100.0

322,051

100.0

42,815

49,817

+16.4

Expenditure trends

Expenditure amounted to €62.2bn in the first two months of the year, an increase of €0.9bn (+1.4%) over the same period last year.

Federal spending is separated into consumption and investment expenditure. Consumption expenditure rose by 2.4% (+€1.3bn) on the year in the January–February 2017 period. This rise was largely the result of an increase in human resources spending and in the ongoing grants and subsidies for public administrations and other areas. Consumption spending was significantly tempered by lower interest payments, however. Interest expenditure was down by €1bn (12%) compared with the same period last year. Investment expenditure declined by 10.0% ( €0.5bn) on the year, which was due to a reduction in federal financial assistance. Fixed asset investment rose at an above-average pace, up by 16.4% in year-on-year terms.

Trends in federal expenditure by function

Actual1

2016

Estimated

2017

Actual

Year‑on‑year

change in %
(year to date)

January to February 2016

January to February 2017

m

Share

in %

€m

Share

in %

€m

General public servic

72,181

 23.2

77,807

 23.6

12,492

12,541

+0.4

Economic cooperation and development

7,732

 2.5

8,501

 2.6

1,567

1,590

+1.5

Defence

34,613

 11.1

36,62

 11.1

5,836

5,756

 -1.4

Government, central administration

14,580

 4.7

16,326

 5.0

2,764

2,972

+7.5

Revenue administration

4,507

 1.5

4,56

 1.4

693

712

+2.8

Education, science, research, cultural affairs

21,472

 6.9

23,935

 7.3

2,995

3,031

+1.2

Support for school and university students and training programme participants

3,516

 1.1

3,977

 1.2

677

767

+13.3

Science, research and development outside of higher education institutions

11,406

 3.7

12,729

 3.9

1,080

1,012

 -6.3

Social security, family youth affairs, labour market policy

160,593

 51.7

170,486

 51.8

31,908

33,716

+5.7

Social insurance including unemployment insurance

106,939

 34.4

111,943

 34.0

24,059

25,172

+4.6

Labour market policy

34,566

 11.1

37,057

 11.3

5,460

6,014

+10.1

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

20,349

 6.6

21,000

 6.4

3,570

3,808

+6.7

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

5,384

 1.7

6,500

 2.0

790

1,025

+29.6

Family assistance, welfare services, etc.

8,065

 2.6

8,275

 2.5

1,371

1,394

+1.7

Social benefits for the consequences of war and political events

2,026

 0.7

2,111

 0.6

399

450

+12.9

Health, environment, sport, recreation

2,074

 0.7

2,324

 0.7

271

298

+10.0

Housing, regional planning and local community services

2,427

 0.8

3,324

 1.0

402

456

+13.6

Housing, home ownership savings premium

1,866

 0.6

2,378

 0.7

396

447

+12.9

Food, agriculture and forestry

900

 0.3

1,25

 0.4

66

71

+7.4

Energy and water supply, trade and services

4,252

 1.4

6,039

 1.8

1,583

1,341

 -15.3

Regional support measures

719

 0.2

1,585

 0.5

24

26

+8.2

Mining, manufacturing and construction

1,705

 0.5

1,546

 0.5

1,348

1,06

 -21.4

Transport and communication

18,313

 5.9

20,818

 6.3

2,229

2,346

+5.2

Roads

8,660

 2.8

9,154

 2.8

770

868

+12.7

Railways and public transport

5,623

 1.8

6,420

 2.0

820

606

 -26.1

Financial management

35,232

 11.3

23,117

 7.0

9,38

8,412

 -10.3

Interest expenditure

17,501

 5.6

18,471

 5.6

8,427

7,413

 -12.0

Total expenditure2

310,581

100.0

329,1

 100.0

61,282

62,156

+1.4

Trends in federal expenditure by economic category

Actual1

2016

Estimated

2017

Actual

Year‑on‑year

change in %
(year to date)

January to

February 2016

January to

February 2017

€m

Share
in %

€m

Share
in %

€m

Consumption expenditure

277,398

89.3

295,969

89.9

56,699

58,032

+2.4

Personnel expenditure

30,665

9.9

31,988

9.7

5,721

6,093

+6.5

Salary payments

22,269

7.2

23,433

7.1

4,000

4,300

+7.5

Pensions

8,396

2.7

8,555

2.6

1,721

1,793

+4.2

Current material expenditure

26,132

8.4

28,957

8.8

3,351

3,477

+3.8

Non-personnel expenditure

1,506

0.5

1,542

0.5

187

200

+7.0

Military procurement

9,963

3.2

11,258

3.4

1,288

936

 -27.3

Other

14,662

4.7

16,157

4.9

1,876

2,341

+24.8

Interest expenditure

17,498

5.6

18,462

5.6

8,426

7,413

 -12.0

Current grants and subsidies

202,339

65.1

215,728

65.6

39,003

40,806

+4.6

to public administration

23,648

7.6

26,824

8.2

2,440

2,608

+6.9

to other sectors

178,691

57.5

188,904

57.4

36,562

38,198

+4.5

including:

 

 

 

 

 

 

 

Private enterprises

26,878

8.7

30,044

9.1

5,136

5,159

+0.4

Pensions, assistance etc.

28,957

9.3

29,893

9.1

5,121

5,361

+4.7

Social insurance funds

112,577

36.2

116,878

35.5

24,790

25,876

+4.4

Other asset transfers

764

0.2

834

0.3

198

242

+22.2

Investment expenditure

33,183

10.7

36,071

11.0

4,583

4,125

 -10.0

Financial assistance

24,358

7.8

26,035

7.9

4,010

3,458

 -13.8

Grants and subsidies

22,787

7.3

22,639

6.9

3,631

3,242

 -10.7

Loans, guarantees

1,069

0.3

1,927

0.6

102

104

+2.0

Acquisition of holdings; capital contributions

501

0.2

1,469

0.4

278

113

 -59.4

Fixed asset investment

8,825

2.8

10,037

3.0

572

666

+16.4

Construction measures

6,846

2.2

7,533

2.3

378

438

+15.9

Acquisition of movable assets

1,480

0.5

1,846

0.6

155

183

+18.1

Acquisition of real property

499

0.2

658

0.2

40

46

+15.0

General reduction/increase in expenditure

0

0.0

-2,940

-0.9

0

0

X

Total expenditure2

310,581

100.0

329,100

100.0

61,282

62,156

+1.4

Fiscal balance

The fiscal balance stood at 12.3bn for the January–February 2017 period. In other words, expenditure exceeded revenue by this amount.

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)

2017

January

Year‑on‑year
change

January

to

February

Year‑on‑year
change

2017 estimates4

Year‑on‑year
change

in €m

in %

in €m

in %

in €m

in %

Joint taxes

 

 

 

 

 

 

Wages tax2

14,747

+5.0

31,182

+6.9

195,150

+5.6

Assessed income tax

1,040

+153.8

2,018

+40.3

54,500

+1.2

Non-assessed taxes on earnings

489

 -36.4

1,969

+3.3

19,220

 -1.2

Final withholding tax on interest and capital gains

855

+100.7

2,002

+18.2

5,240

 -11.8

Corporation tax

365

+1.666.1

683

 -49.6

26,750

 -2.5

Value added taxes (VAT)

22,807

+7.0

41,577

+6.3

226,650

+4.4

Trade tax apportionment

188

+39.1

250

+146.8

4,456

+5.2

Increased trade tax apportionment

32

 -11.0

176

+195.2

3,664

+1.9

Total joint taxes

40,522

+9.0

79,859

+6.7

535,630

+3.7

Federal taxes

 

 

 

 

 

 

Energy duty

1,463

+0.6

1,74

+2.6

40,000

 -0.2

Tobacco duty

971

+41.8

1,402

+13.1

14,700

+3.6

Spirits duty incl. alcopops duty

239

 -0.1

453

+4.4

2,050

 -1.0

Insurance tax

4,094

+3.6

5,455

+5.6

13,050

+2.2

Electricity duty

498

 -3.8

1,024

 -7.4

6,530

 -0.6

Motor vehicle tax

733

+4.6

1,617

 -0.3

8,900

 -0.6

Aviation tax

72

+5.5

112

+5.2

1,106

+3.0

Nuclear fuel duty

0

X

0

X

0

X

Solidarity surcharge

1,033

+10.6

2,162

+6.0

17,45

+3.5

Other federal taxes

140

+9.5

263

+0.9

1,467

+0.6

Total federal taxes

9,243

+6.5

14,227

+4.1

105,253

+0.8

Länder taxes

 

 

 

 

 

 

Inheritance tax

474

+10.1

994

+11.4

5,307

 -24.3

Real property transfer tax

1,093

+2.9

2,198

+3.5

12,958

+4.4

Betting and lottery tax

149

 -0.2

341

+13.6

1,850

+2.3

Beer duty

41

 -3.5

95

 -6.6

667

 -1.6

Other Länder taxes

29

+4.0

49

+4.3

453

+2.6

Total Länder taxes

1,785

+4.3

3,677

+6.1

21,235

 -5.0

EU own resources

 

 

 

 

 

 

Customs duty

469

+1.1

831

 -2.2

5,300

+3.7

VAT-based own resources

236

 -71.0

433

 -62.9

2,440

 -42.6

GNI-based own resources

2,015

 -52.7

-976

X

21,680

+8.9

Total EU own resources

2,720

 -50.9

288

 -95.3

29,420

+0.5

Federation3

23,880

+24.6

47,819

+20.6

305,606

+5.7

Länder 3

22,334

+8.3

44,147

+6.6

288,292

 -0.1

EU

2,720

 -50.9

288

 -95.3

29,420

+0.5

Local authorities’ share of income tax and value added tax

3,085

+14.4

6,340

+11.8

44,100

+6.7

Total tax revenue (excluding local authority taxes)

52,019

+8.3

98,595

+6.2

667,418

+2.9

Tax revenue in February 2017

Total tax revenue (excluding local authority taxes) posted another robust year-on-year gain in February 2017, up by 8.3%. The sharp increase in revenue from joint taxes (which were up by 9.0% on the year due to higher receipts from wages tax and value added taxes) played a key role in this result. Revenue from assessed income tax and corporation tax also posted strong increases in February 2017. Receipts from final withholding tax on interest and capital gains were also up tangibly in February compared with the same month last year. In contrast, there was a decline in revenue from non-assessed taxes on earnings. Receipts from federal taxes were up significantly on the year (+6.5%), and revenue from Länder taxes again recorded strong gains (+4.3%).

EU own resources

Payments of own resources to the EU, including customs duties, fell by 50.9% in February 2017 compared with the same month last year. On a cumulative basis, an even greater year-on-year decline of 95.3% was recorded in the January–February period. This was the result of three factors. First, the Federation received €4.7bn in January 2017 as a result of corrections and EU amending budgets from previous years, giving the 2017 federal budget a one-off boost. Second, Germany was granted a discount on its VAT-based own resources as a result of the implementation of the Own Resources Decision. This will reduce transfers of VAT-based own resources by 50% in 2017 compared with 2016. Third, Germany’s annual contribution of GNI-based own resources was set about €2bn lower in the 2017 EU budget than in 2016, leading to lower monthly transfers. Overall, therefore, it is anticipated that Germany’s transfers of own resources to the EU will be lower this year than in 2016. Payments are subject to fluctuations over the course of the year, depending on the EU’s financing needs at any given time.

Cumulative overview of the January–February 2017 period

Tax receipts increased by 6.2% overall in the January–February 2017 period. This upward trend was apparent in receipts from joint taxes (+6.7%), taxes accruing to the Federation (+4.1%), and taxes accruing to the Länder (+6.1%).

Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants to the Länder) rose by 24.6% on the year in February 2017. The main factor in this large increase was the drop in own resources payments to the EU, as described above. There was also a 7.7% increase in the Federation’s share of revenue from joint taxes. This was due to a change in the formula for distributing VAT revenue, as part of a move to increase federal support for the Länder and local authorities to help them pay for refugee-related costs. This led to changes in the allocation of VAT revenue to the Federation, Länder and local authorities compared with the previous year. The Länder’s tax revenue increased by 8.3% on the year in February 2017. This was because the Länder now receive a higher percentage of VAT revenue, combined with growth in receipts from joint taxes and taxes accruing to the Länder. Local authorities’ shares of receipts from VAT and joint taxes were up by 28.8% and 14.4% respectively over February 2016.

Joint taxes

Wages tax

The steady upward trend in wages tax revenue in recent months continued, buoyed by the ongoing positive employment situation and further wage increases. Gross revenue from this tax increased by 4.4% on the year in February 2017. Child benefit payments, which are financed from wages tax receipts and must be subtracted from this figure, increased by 2.7% over the same month last year. On balance, cash receipts from wages tax were up by 5.0% in year-on-year terms in February 2017.

Corporation tax

Receipts from corporation tax were up on the year in February 2017. However, revenues from this tax are usually subject to strong fluctuations over the course of the year. Prepayments are due in March, June, September and December, and the months in between tend to be marked by lower revenues. A 16% increase in retroactive prepayments for 2016 as a result of assessments for 2015, combined with rising back payments and falling refunds, all point to a continuation of the upward trend in corporate profits. Prepayments are generally adjusted based on the most recent assessment. Hence when there is a sustained upward economic trend, there is a time lag of between one and two years before rising profits have a noticeable impact on tax revenue. The March result for corporation tax revenue will however be more significant in terms of identifying the general trend. After deducting investment allowance payments, which are continuing to decline in volume terms, cash receipts from corporate tax stood at €0.4bn for February 2017. However, a high volume of corporation tax refunds is still expected for 2017 due to high court rulings which have not yet had an impact on revenue (Federal Fiscal Court rulings on the STEKO case and section 40 of the Capital Investment Companies Act).

Assessed income tax

Gross revenue from assessed income tax was up by 36.9% over February 2016. Given that a large part of the revenue from assessed income tax is dependent on the current economic situation, receipts from this tax showed a similar trend to corporation tax. Retroactive prepayments for 2016 also rose by 16%, and the balance of back payments and refunds showed a significant improvement. As is the case with corporation tax, the figures for prepayments in March will reveal more about the general trend. Cash receipts from assessed income tax stood at approximately €1.0bn in February 2017, after subtracting employee refunds, investment allowance payments and owner-occupied homes premiums.

Non-assessed taxes on earnings

February 2017 saw a year-on-year drop of 26.1% in gross receipts from non-assessed taxes on earnings. After deducting refunds by the Federal Central Tax Office, which are financed from this revenue and which were up by 9.5%, cash receipts from non-assessed taxes on earnings fell by 36.4% in February. However, taken in combination with the revenue increase in January, there was still a slight year-on-year increase in the January–February 2017 period (+3.3%).

Final withholding tax on interest and capital gains

In February 2017, receipts from final withholding tax on interest and capital gains doubled compared with February 2016. The trend in recent months suggests that revenue from this tax will see something of a stabilisation at a lower level. The rise in February could be due to revenue from the taxation of capital gains. No reliable information can be provided on this question, however, as statistical data on the breakdown of revenue from interest and from capital gains is not available.

Value added taxes

VAT revenue once again posted above-average growth in February 2017 (+7.0%) following a considerable increase in the previous month. There may be a trend reversal in the coming months, though, given the fact that VAT revenue can display high volatility over the course of the year. Receipts from domestic VAT grew by 5.7% in year-on-year terms, while the yield from import VAT climbed by 12.1%.

Taxes accruing to the Federation

The Federation’s total tax receipts were up sharply by 6.5% on the year in February 2017. The most significant increase involved revenue from tobacco duty, which rose by 41.8%. The trend in tobacco duty receipts is determined by purchases of excise stamps by the tobacco industry and is therefore dependent on tobacco companies’ sales strategies. The revenue increase in February 2017 is therefore more of an adjustment after the weak trend in previous months than an indication of increasing tobacco consumption. Receipts from energy duty recorded an increase of 0.6% while revenue from insurance tax rose by 3.6%. Other taxes posting revenue gains included aviation tax (+5.5%), the solidarity surcharge (+10.6%) and coffee duty (+16.7%). In contrast, receipts from electricity duty were down by 3.8% on the year in February 2017. Trends in revenue from other taxes had only a minor impact on the overall results for federal taxes.

Taxes accruing to the Länder

Revenue from taxes accruing solely to the Länder rose by 4.3% on the year in February 2017. Inheritance tax receipts were up by 10.1% on the year. Year-on-year revenue gains were also recorded for real property transfer tax (+2.9%) and fire protection tax (+3.4%). Receipts from betting and lottery tax remained at almost the same level as in the same period last year ( 0.2%), while beer duty revenue fell by 3.5% on the year.