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24 May 2017

May 2017 month­ly re­port

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

Federal budget trends up to and including April 2017

Trends in the federal budget

 

Actual 2016

Estimated 2017

Actual1 as of
April 2017

Expenditure (€bn)2

310.6329.1109.7

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

  +2.8
Revenue (€bn)2316.8322.1106.8

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

  +6.8
Tax revenue (€bn)289.0301.099.8

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

  +12.6

Fiscal balance (€bn)

6.2-7.0-2.9

Financing/use of surplus:

-6.27.02.9

Cash resources (€bn)

--49.4

Seigniorage (€bn)

0.30.3-0.1

reserve funds balance (€bn)

-6.56.70.0
Net borrowing/current financial market balance3 (€bn)0.00.0-46.4
1 As per accounts.
2 Excluding revenue and expenditure from internal offsetting.
3 (-) debt repayment; (+) borrowing
Source: Federal Ministry of Finance

Revenue trends

In the first four months of 2017, federal revenue was up on the year by €6.8bn, or 6.8%. Tax revenue, which accounts for the largest share of total revenue, amounted to €99.8bn during this period (a year-on-year gain of 12.6%). Other revenue was down by €4.4bn on the year, mainly due to a €2.8bn decline in Bundesbank profits.

Trends in federal revenue

Actual

2016

Estimated

2017

Actual

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

January to April 2016

January to April 2017

€m

Share
in %

€m

Share

in %

€m

I. Tax revenue

288,99191.2301,02993.588,65799,796+12.6

Federal share of joint taxes:

235,74774.4246,46976.573,58478,805+7.1

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

127,46340.2130,18740.436,81140,614+10.3

of which:

  

Wages tax

78,51924.882,93925.822,93424,458+6.6

Assessed income tax

22,8797.223,0267.16,5937,818+18.6

Non-assessed taxes on earnings

9,7313.19,6103.02,0832,405+15.5

Final withholding tax on interest and capital gains

2,6130.82,3060.71,1561,401+21.2

Corporation tax

13,7214.313,2494.14,0444,531+12.0

Value added taxes (VAT)

106,52933.6114,43635.536,46737,821+3.7

Trade tax apportionment

1,7550.61,8460.6305370+21.3

Energy duty

40,09112.739,79612.47,7147,806+1.2

Tobacco duty

14,1864.514,7004.64,3213,855 -10.8

Solidarity surcharge

16,8555.317,4505.45,0145,461+8.9

Insurance tax

12,7634.013,0504.16,6656,928+3.9

Electricity duty

6,5692.16,5302.02,2642,328+2.8

Motor vehicle tax

8,9522.88,9002.83,3063,293 -0.4

Nuclear fuel tax

4220.100.000X

Spirits duties

2,0720.72,0510.6708718+1.4

Coffee duty

1,0400.31,0500.3349347 -0.6

Aviation tax

1,0740.31,1010.3265278+4.9

Supplementary grants to Länder

-9,845-3.1-9,228-2.9-2,388-2,271 -4.9

EU GNI own resources

-19,911-6.3-21,680-6.7-6,862-2,073 -69.8

EU VAT own resources

-4,250-1.3-2,440-0.8-1,700-787 -53.7

Grants to Länder for public transport

-8,200-2.6-8,144-2.5-2,469-2,783+12.7

Grants to Länder for motor vehicle tax and HGV toll

-8,992-2.8-8,992-2.8-2,248-2,248+0.0

II. Other revenue

27,8398.821,0216.511,4237,042 -38.4

Revenue from economic activity

6,8472.25,4681.74,6021,710 -62.8

Interest revenue

3020.13000.16771+6.0

Loan repayments, holdings, privatisation revenue

2,8900.91,8000.6669339 -49.3

Total revenue1

316,829100.0322,051100.0100,080106,838+6.8
1 Excluding revenue from internal offsetting.
Source: Federal Ministry of Finance.

Expenditure trends

Federal expenditure totalled €109.7bn in the first four months of 2017, up on the year by €3.0bn, or 2.8%.

Federal spending is separated into consumption and investment expenditure. Consumption expenditure was up on the year by €3.0bn (+3.1%) during this period, mainly due to increases in human resources spending and operating expenses, which rose by 4.6% and 4.9%, respectively. Ongoing grants to other areas – in particular, pensions, benefits and social security funds – were also expanded significantly. For example, federal grants for basic income support for jobseekers (“unemployment benefit II”) and parental benefit increased by 7.0% and 6.3%, respectively. Interest payments up to and including April 2017 amounted to €8.1bn, up slightly on the year by 0.5%. Investment spending was down by €80m (or 1%) during this period. Within this category, federal financial assistance to promote investment by the Länder and local authorities declined in comparison with the same period a year ago, while fixed asset investment climbed markedly.

Trends in federal expenditure by function

Actual

2016

Estimated

2017

Actual

Year‑on‑year

change in %
(year to date)

January to April 2016

January to April 2017

m

Share

in %

€m

Share

in %

€m

General public servic

72,181 23.277,807 23.623,68823,518 -0.7

Economic cooperation and development

7,732 2.58,501 2.62,8052,313 -17.5

Defence

34,613 11.136,620 11.111,14411,201+0.5

Government, central administration

14,580 4.716,326 5.05,1695,575+7.8

Revenue administration

4,507 1.54,560 1.41,3791,446+4.9

Education, science, research, cultural affairs

21,472 6.923,935 7.35,7485,698 -0.9

Support for school and university students and training programme participants

3,516 1.13,977 1.21,1651,275+9.4

Science, research and development outside of higher education institutions

11,406 3.712,729 3.92,2602,206 -2.4

Social security, family and youth affairs, labour market policy

160,593 51.7170,486 51.858,42761,970+6.1

Social insurance including unemployment insurance

106,939 34.4111,943 34.041,78643,706+4.6

Labour market policy

34,566 11.137,057 11.310,90012,229+12.2

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

20,349 6.621,000 6.46,9927,479+7.0

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

5,384 1.76,500 2.01,6272,069+27.2

Family assistance, welfare services, etc.

8,065 2.68,275 2.52,7322,780+1.8

Social benefits for the consequences of war and political events

2,026 0.72,111 0.6754804+6.7

Health, environment, sport, recreation

2,074 0.72,324 0.7543627+15.3

Housing, regional planning and local community services

2,427 0.83,324 1.08741,052+20.4

Housing, home ownership savings premium

1,866 0.62,378 0.7788959+21.6

Food, agriculture and forestry

900 0.31,250 0.4164172+4.9

Energy and water supply, trade and services

4,252 1.46,039 1.82,0171,651 -18.1

Regional support measures

719 0.21,585 0.57383+13.7

Mining, manufacturing and construction

1,705 0.51,546 0.51,4151,136-19.7

Transport and communication

18,313 5.920,818 6.34,4704,850+8.5

Roads

8,660 2.89,154 2.81,7572,031+15.6

Railways and public transport

5,623 1.86,420 2.01,4231,312-7.8

Financial management

35,232 11.323,117 7.011,62510,289-11.5

Interest expenditure

17,501 5.618,471 5.68,0838,121+0.5

Total expenditure1

310,581100.0329,100 100.0106,757109,720+2,8
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

April 2016

January to

April 2017

€m

Share
in %

€m

Share
in %

€m

Consumption expenditure

277,39889.3295,96989.998,890101,932+3.1

Personnel expenditure

30,6659.931,9889.710,70911,206+4.6

Salary payments

22,2697.223,4337.17,6388,015+4.9

Pensions

8,3962.78,5552.63,0723,190+3.8

Current material expenditure

26,1328.428,9578.87,0287,374+4.9

Non-personnel expenditure

1,5060.51,5420.5419432+3.1

Military procurement

9,9633.211,2583.42,4772,178 -12.1

Other

14,6624.716,1574.94,1324,764+15.3

Interest expenditure

17,4985.618,4625.68,0828,120+0.5

Current grants and subsidies

202,33965.1215,72865.672,73874,831+2.9

to public administration

23,6487.626,8248.27,1796,982 -2.7

to other sectors

178,69157.5188,90457.465,55967,849+3.5

including:

  

Private enterprises

26,8788.730,0449.18,9228,959+0.4

Pensions, assistance etc.

28,9579.329,8939.110,02810,536+5.1

Social insurance funds

112,57736.2116,87835.543,29345,359+4.8

Other asset transfers

7640.28340.3332401+20.8

Investment expenditure

33,18310.736,07111.07,8687,788 -1.0

Financial assistance

24,3587.826,0357.96,4896,091 -6.1

Grants and subsidies

22,7877.322,6396.95,8655,752 -1.9

Loans, guarantees

1,0690.31,9270.6303226 -25.4

Acquisition of holdings; capital contributions

5010.21,4690.4320113 -64.7

Fixed asset investment

8,8252.810,0373.01,3791,697+23.1

Construction measures

6,8462.27,5332.39861,216+23.3

Acquisition of movable assets

1,4800.51,8460.6314376+19.7

Acquisition of real property

4990.26580.279105+32.9

General reduction/increase in expenditure

00.0-2,940-0.900X

Total expenditure1

310,581100.0329,100100.0106,757109,720+2.8
1 Excluding expenditure from internal offsetting.
Source: Federal Ministry of Finance.

Fiscal balance

In the first four months of 2017, expenditure exceeded revenue by €2.9bn.

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

April

Year‑on‑year
change

January to

April

Year‑on‑year
change

2017 estimates4

Year‑on‑year
change

in €m

in %

in €m

in %

in €m

in %

Joint taxes

      

Wages tax2

16,149+4.861,457+6.0194,250+5.1

Assessed income tax

1,389+46.718,398+18.657,500+6.8

Non-assessed taxes on earnings

1,277+2.34,922+15.219,450+0.0

Final withholding tax on interest and capital gains

669+50.03,185+21.26,548+10.2

Corporation tax

551X9,062+12.027,080 -1.3

Value added taxes (VAT)

17,302+4.974,805+5.5227,550+4.8

Trade tax apportionment

907+4.91,165+19.54,658+9.9

Increased trade tax apportionment

865+3.61,046+16.43,879+7.9

Total joint taxes

39,109+9.0174,040+7.9540,915+4.7

Federal taxes

Energy duty

2,994 -3.27,806+1.240,200+0.3

Tobacco duty

1,218 -23.83,855 -10.814,190+0.0

Spirits duty incl. alcopops duty

140 -1.4718+1.52,070 -0.0

Insurance tax

751+4.46,928+4.013,200+3.4

Electricity duty

582+0.52,328+2.86,600+0.5

Motor vehicle tax

756 -7.43,293 -0.49,000+0.5

Aviation tax

89+1.5278+4.91,125+4.8

Nuclear fuel duty

0X0X0X

Solidarity surcharge

1,138+9.85,461+8.917,600+4.4

Other federal taxes

123+6.3486+0.41,458 -0.0

Total federal taxes

7,789 -4.931,153+1.3105,443+1.0

Länder taxes

Inheritance tax

503 -19.72,144 -6.66,010 -14.2

Real property transfer tax

926 -5.04,285+2.212,730+2.6

Betting and lottery tax

158+8.5649+8.71,870+3.4

Beer duty

53 -3.7197 -2.3671 -1.0

Other Länder taxes

29 -7.4228+3.6453+2.6

Total Länder taxes

1,669 -8.97,503 -0.021,734 -2.7

EU own resources

Customs duty

450+4.21,674 -3.05,200+1.7

VAT-based own resources

197+11.2787 -53.72,450 -42.4

GNI-based own resources

1,694+83.32,073 -69.818,200 -8.6

Total EU own resources

2,341+52.74,535 -55.925,850 -11.7

Federation3

21,399+0.3100,050+12.5308,028+6.6

Länder3

22,101+7.395,410+7.1294,824+2.1

EU

2,341+52.74,535 -55.925,850 -11.7

Local authorities’ share of income tax and value added tax

3,177+10.514,375+11.244,590+7.8

Total tax revenue (excluding local authority taxes)

49,018+5.8214,370+6.5673,292+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 Source: Working Party on Tax Revenue Estimates, November 2016.

Tax revenue in April 2017

Total tax revenue (excluding local authority taxes) recorded another robust year-on-year gain in April 2017, up by 5.8%. This outcome was driven by a sharp increase in receipts from joint taxes, which climbed by 9.0% on the year. The largest contribution came from corporation tax, which posted a revenue gain of €0.9bn. The two taxes that generate the most revenue – wages tax and value added taxes – also played a key role in reinforcing the upward trend in revenue from joint taxes. Revenue from both assessed income tax as well as withholding tax on interest and capital gains grew at a very high rate, but their contribution to the total increase in revenue from joint taxes was less significant due to their relatively low baseline levels in April. Receipts from federal taxes were down by 4.9% on the year in April, with the yield from both energy duty and tobacco duty registering year-on-year declines. Revenue from Länder taxes was also down in April (by 8.9%), after having declined already in March.

EU own resources

Payments of own resources to the EU, including customs duties, rose by 52.7% in April 2017 compared with the same month last year. On a cumulative basis, however, own resources payments to the EU fell by 55.9% on the year in the first four months of 2017, due to (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. Payments are subject to fluctuations over the course of the year, depending on the EU’s financing needs at any given time.

Overview of the January–April 2017 period

Total tax receipts increased by 6.5% in the first four months of 2017. Revenue from joint taxes grew by 7.9%, while the yield from taxes accruing solely to the Federation was up by 1.3%. Receipts from taxes accruing solely to the Länder remained roughly constant on the year.

Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants to the Länder) were up only slightly in April 2017, by 0.3% on the year. The Federation’s share of revenue from joint taxes increased, but this was nearly cancelled out by a decline in receipts from purely federal taxes and the sharp rise in transfers of own resources to the EU. Länder tax revenue was up by 7.3% in April, as an increase in the share of joint tax revenue accruing to the Länder was offset only slightly by a decline in receipts from purely Länder taxes. Local authority revenue from joint taxes was up by 10.5% on the year overall in April 2017.

Joint taxes

Wages tax

The steady upward trend in wages tax revenue in recent months continued, buoyed by sustained positive employment trends and rising wages. Gross wages tax revenue climbed by 4.0% on the year in April 2017. Child benefit payments – which are financed from wages tax receipts and subtracted from the gross figure – remained roughly constant (up 0.1% compared with April 2016). This meant that, on balance, cash receipts from wages tax were up by 4.8% on the year in April. In cumulative terms, cash receipts from wages tax were up markedly by 6.0% on the year in the first four months of 2017.

Corporation tax

Gross revenue from corporation tax rose sharply on the year in April, which tends to be a low-revenue month for this tax, when receipts are driven largely by tax assessments. Assessments from previous years led to a surge in retroactive prepayments, and back payments increased as well. However, the most important factor contributing to revenue growth in April was a roughly 40% decline in refunds. After subtraction of investment allowance payments, which continue to decline in terms of volume, cash receipts from corporation tax posted a year-on-year gain of €0.9bn in April 2017. A high volume of corporation tax refunds is expected over the course of 2017 as a result of high court rulings that 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 only slightly over April 2016. Refunds to employees assessed for income tax declined significantly on the year in April 2017. However, part of this decline was the result of a change in how one Land records statistics on employee refunds. As was the case with corporation tax, assessments of other types of income led to an increase in retroactive prepayments. The balance between back payments and refunds (excluding employee refunds) also boosted receipts. As a result, cash receipts from assessed income tax were up by 46.7% on the year in April 2017. In cumulative terms, cash receipts from assessed income tax were up by 18.6% on the year in the first four months of 2017.

Non-assessed taxes on earnings

April 2017 saw a year-on-year increase of 14.3% in gross receipts from non-assessed taxes on earnings. Refunds by the Federal Central Tax Office, which are financed from this revenue, were up sharply by approximately €150m. This meant that, on balance, cash receipts from non-assessed taxes on earnings posted only moderate growth in April, up by 2.3% on the year. In the first four months of 2017, cumulative cash receipts from non-assessed taxes on earnings were up by 15.2% compared with the same period in 2016.

Final withholding tax on interest and capital gains

Receipts from final withholding tax on interest and capital gains continue to trend upwards, posting a significant year-on-year gain of 50.0% in April 2017. The increase in April may have been the result of growth in revenue from the taxation of capital gains, given that interest rates are still very low. No reliable information can be provided on this question, however, as statistical data on the breakdown of revenue from interest and from capital gains are not available. Taken cumulatively, revenue from final withholding tax on interest and capital gains was up by 21.2% on the year in the first four months of 2017.

Value added taxes

VAT revenue once again posted substantial growth in April 2017 (+4.9%), following significant increases in previous months. However, it should be noted that VAT revenue displays a high level of volatility over the course of the year. In April, receipts from domestic VAT grew by 0.6% in year-on-year terms, while the yield from import VAT climbed by 17.3%. In cumulative terms, revenue from value added taxes was up sharply by 5.5% on the year in the first four months of 2017.

Taxes accruing to the Federation

Revenue from taxes accruing solely to the Federation fell by 4.9% on the year in April 2017. Individual taxes showed very different trends, however. Receipts from some taxes declined, including tobacco duty ( 23.8%), energy duty ( 3.2%), motor vehicle tax ( 7.4%) and spirits duty ( 1.4%). In contrast, other taxes posted revenue growth, including solidarity surcharge (+9.8%), insurance tax (+4.4%) and aviation tax (+1.5%). Changes in revenue from other taxes had only a minor impact on the overall results for federal taxes. In cumulative terms, receipts from federal taxes were up by 1.3% on the year in the first four months of 2017.

Taxes accruing to the Länder

Revenue from taxes accruing solely to the Länder fell by 8.9% on the year in April 2017. This decline was driven by lower year-on-year receipts for inheritance tax ( 19.7%), real property transfer tax ( 5.0%), beer duty ( 3.7%) and fire protection tax ( 7.6%). In contrast, revenue from betting and lottery tax posted strong year-on-year growth of 8.5%. Taken cumulatively, receipts from Länder taxes remained constant on the year in the first four months of 2017.

Results of the May 2017 tax revenue estimate

The Working Party on Tax Revenue Estimates convened on 9-11 May 2017 for its 151st meeting, which took place in the town of Bad Muskau. In its assessment of tax revenue trends in the years from 2017 to 2021, the group projected that tax revenue will grow by 3.8% overall in 2017. Tax revenue is expected to keep posting strong growth throughout the remaining projection period up to 2021. The Working Party’s findings reflect the ongoing positive performance of the German economy, as demonstrated by high employment levels, robust domestic demand, higher wages and rising business profits. Positive revenue trends are being driven primarily by receipts from joint taxes. Receipts from the two most important sources of tax revenue – wages tax and value added taxes – are forecast to post strong growth during the projection period. The same is true for receipts from assessed income tax and corporation tax, which are both profit-based taxes. The Working Party also projects that the largest source of revenue for local authorities – trade tax – will continue to post dynamic growth. In contrast, revenue from Länder taxes, federal taxes and other local authority taxes is expected to grow at a below-average rate. Details of the Working Party’s findings will be published in the Finance Ministry’s June 2017 monthly report.

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