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20 October 2017

Oc­to­ber 2017 month­ly re­port

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

Federal budget trends up to and including September 2017

Trends in the federal budget

 

Actual 2016

Estimated 2017

Actual1 as of
September 2017

Expenditure (€bn)2

310.6

329.1

243,8

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

+5,2

Revenue (€bn)2

316.8

322.1

237,3

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

+1,8

Tax revenue (€bn)

289.0

301.0

221,6

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

+5,2

Fiscal balance (€bn)

6.2

-7.0

-6,4

Financing/use of surplus:

-6.2

7.0

6,4

Cash resources (€bn)

-

-

37,7

Seigniorage (€bn)

0.3

0.3

0,1

Reserve funds balance (€bn)

-6.5

6.7

0,0

Net borrowing/current financial market balance3 (€bn)

0.0

0.0

-31,4

Revenue trends

Federal revenue for the period from January up to and including September 2017 totalled €237.3bn. This is equivalent to 74% of the target revenue for the entire year, and represents a year-on-year gain of 1.8% (or €4.2bn). Two factors tempered year-on-year revenue growth: First, the Federation was required to pay back €6.3bn in nuclear fuel duty revenue, plus €1bn in interest, to affected energy companies as a result of the Federal Constitutional Court’s ruling on the unconstitutionality of nuclear fuel duty, which was handed down on 13 April 2017 and published on 7 June 2017. Second, the amount of Bundesbank profits paid over to the Federation turned out to be €2.1bn less than projected. Tax revenue posted a strong gain of 5.2% (approximately €11bn) on the year. Other revenue, which includes profit transfers from the Bundesbank, declined sharply by 30% (approximately €6.8bn).

Trends in federal revenue

Actual

2016

Estimated

2017

Actual

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

January to September 2016

January to September 2017

€m

Share
in %

€m

Share

in %

€m

I. Tax revenue

288,991

91.2

301,029

93.5

210,620

221,576

+5.2

Federal share of joint taxes:

235,747

74.4

246,469

76.5

174,809

184,577

+5.6

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

127,463

40.2

130,187

40.4

91,840

99,242

+8.1

of which:

 

 

Wages tax

78,519

24.8

82,939

25.8

54,628

58,137

+6.4

Assessed income tax

22,879

7.2

23,026

7.1

16,749

18,936

+13.1

Non-assessed taxes on earnings

9,731

3.1

9,610

3.0

7,848

8,562

+9.1

Final withholding tax on interest and capital gains

2,613

0.8

2,306

0.7

1,961

2,400

+22.4

Corporation tax

13,721

4.3

13,249

4.1

10,654

11,208

+5.2

Value added taxes (VAT)

106,529

33.6

114,436

35.5

82,030

84,261

+2.7

Trade tax apportionment

1,755

0.6

1,846

0.6

939

1,074

+14.4

Energy duty

40,091

12.7

39,796

12.4

24,629

25,400

+3.1

Tobacco duty

14,186

4.5

14,700

4.6

9,871

10,138

+2.7

Solidarity surcharge

16,855

5.3

17,450

5.4

12,387

13,276

+7.2

Insurance tax

12,763

4.0

13,050

4.1

10,725

11,199

+4.4

Electricity duty

6,569

2.1

6,530

2.0

4,841

5,158

+6.5

Motor vehicle tax

8,952

2.8

8,900

2.8

7,053

7,042

 -0.2

Nuclear fuel tax

422

0.1

0

0.0

355

-7,261

X

Spirits duties

2,072

0.7

2,051

0.6

1,539

1,557

+1.2

Coffee duty

1,040

0.3

1,050

0.3

766

763

 -0.4

Aviation tax

1,074

0.3

1,101

0.3

736

782

+6.3

Supplementary grants to Länder

-9,845

-3.1

-9,228

-2.9

-7,484

-7,093

 -5.2

EU GNI own resources

-19,911

-6.3

-21,680

-6.7

-14,412

-9,478

 -34.2

EU VAT own resources

-4,250

-1.3

-2,440

-0.8

-3,188

-1,772

 -44.4

Grants to Länder for public transport

-8,200

-2.6

-8,144

-2.5

-5,556

-6,261

+12.7

Grants to Länder for motor vehicle tax and HGV toll

-8,992

-2.8

-8,992

-2.8

-6,744

-6,744

+0.0

II. Other revenue

27,839

8.8

21,021

6.5

22,534

15,772

 -30.0

Revenue from economic activity

6,847

2.2

5,468

1.7

5,644

2,861

 -49.3

Interest revenue

302

0.1

300

0.1

184

239

+29.9

Loan repayments, holdings, privatisation revenue

2,890

0.9

1,800

0.6

2,393

1,300

 -45.7

Total revenue1

316,829

100.0

322,051

100.0

233,154

237,349

+1.8

Expenditure trends

Federal expenditure for the first nine months of 2017 totalled €243.8bn and accounts for roughly 74% of the targeted spending for all of 2017. This represents a total increase of 5.2% (€12.1bn) on the year.

Federal spending is separated into consumption and investment expenditure. In the nine-month period from January to September 2017, consumption spending was up by 4.5% on the year. Within this category, both human resources spending and operating expenditure posted increases that were slightly above average at +4.8% and +6.6%, respectively. Ongoing grants to public administrations were up on the year by 6.2% (€1.1bn), due mainly to an increase in grants to the Länder, which exceeded last year’s figure by 13.4% (€1.3bn). Spending on subsidies for other areas also increased by 4.3% on the year, primarily as a result of higher spending on pensions, social security and benefits (e.g. parental benefit and basic income support for jobseekers, which rose by 6.9% and 6.4%, respectively). Interest payments posted a slight increase, climbing by 2.2% on the year. Investment spending recorded a marked cumulative year-on-year gain of 13.7% in the first nine months of 2017. Within this category, fixed asset investment surged by 15.0%. Construction investment, which accounts for the largest share of fixed asset investment, posted a similarly strong gain of +14.0%. Spending on federal financial assistance was up markedly on the year (by 13.2%), mainly as a result of allocations made by the Federation to increase the equity of Deutsche Bahn AG.

Trends in federal expenditure by function

Actual

2016

Estimated

2017

Actual

Year‑on‑year

change in %
(year to date)

January to September 2016

January to

September 2017

m

Share

in %

€m

Share

in %

€m

General public services

72,181

 23.2

77,807

 23.6

52,211

53,940

+3.3

Economic cooperation and development

7,732

 2.5

8,501

 2.6

5,019

4,602

 -8.3

Defence

34,613

 11.1

36,620

 11.1

25,002

25,704

+2.8

Government, central administration

14,580

 4.7

16,326

 5.0

11,377

12,326

+8.3

Revenue administration

4,507

 1.5

4,560

 1.4

3,203

3,341

+4.3

Education, science, research, cultural affairs

21,472

 6.9

23,935

 7.3

13,939

13,866

 -0.5

Support for school and university students and training programme participants

3,516

 1.1

3,977

 1.2

2,419

2,576

+6.5

Science, research and development outside of higher education institutions

11,406

 3.7

12,729

 3.9

6,676

6,649

 -0.4

Social security, family and youth affairs, labour market policy

160,593

 51.7

170,486

 51.8

125,130

132,333

+5.8

Social insurance including unemployment insurance

106,939

 34.4

111,943

 34.0

86,296

90,178

+4.5

Labour market policy

34,566

 11.1

37,057

 11.3

25,045

28,026

+11.9

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

20,349

 6.6

21,000

 6.4

15,488

16,450

+6.2

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

5,384

 1.7

6,500

 2.0

3,704

5,065

+36.7

Family assistance, welfare services, etc.

8,065

 2.6

8,275

 2.5

6,184

6,287

+1.7

Social benefits for the consequences of war and political events

2,026

 0.7

2,111

 0.6

1,606

1,563

 -2.7

Health, environment, sport, recreation

2,074

 0.7

2,324

 0.7

1,318

1,409

+6.9

Housing, regional planning and local community services

2,427

 0.8

3,324

 1.0

1,666

1,968

+18.1

Housing, home ownership savings premium

1,866

 0.6

2,378

 0.7

1,468

1,761

+20.0

Food, agriculture and forestry

900

 0.3

1,250

 0.4

425

508

+19.4

Energy and water supply, trade and services

4,252

 1.4

6,039

 1.8

3,234

3,135

 -3.0

Regional support measures

719

 0.2

1,585

 0.5

445

434

 -2.4

Mining, manufacturing and construction

1,705

 0.5

1,546

 0.5

1,557

1,372

 -11.8

Transport and communication

18,313

 5.9

20,818

 6.3

11,768

14,277

+21.3

Roads

8,660

 2.8

9,154

 2.8

5,304

5,882

+10.9

Railways and public transport

5,623

 1.8

6,420

 2.0

3,598

4,978

+38.3

Financial management

35,232

 11.3

23,117

 7.0

22,900

22,599

 -1.3

Interest expenditure

17,501

 5.6

18,471

 5.6

16,402

16,763

+2.2

Total expenditure1

310,581

100.0

329,100

 100.0

231,684

243,790

+5.2

Trends in federal expenditure by economic category

Actual

2016

Estimated

2017

Actual

Year‑on‑year

change in %
(year to date)

January to

September 2016

January to

September 2017

€m

Share
in %

€m

Share
in %

€m

Consumption expenditure

277,398

89.3

295,969

89.9

213,545

223,160

+4.5

Personnel expenditure

30,665

9.9

31,988

9.7

23,484

24,612

+4.8

Salary payments

22,269

7.2

23,433

7.1

16,841

17,698

+5.1

Pensions

8,396

2.7

8,555

2.6

6,644

6,914

+4.1

Current material expenditure

26,132

8.4

28,957

8.8

17,169

18,298

+6.6

Non-personnel expenditure

1,506

0.5

1,542

0.5

1,022

1,059

+3.6

Military procurement

9,963

3.2

11,258

3.4

6,163

6,021

 -2.3

Other

14,662

4.7

16,157

4.9

9,984

11,218

+12.4

Interest expenditure

17,498

5.6

18,462

5.6

16,400

16,760

+2.2

Current grants and subsidies

202,339

65.1

215,728

65.6

155,843

162,821

+4.5

to public administration

23,648

7.6

26,824

8.2

16,846

17,898

+6.2

to other sectors

178,691

57.5

188,904

57.4

138,997

144,923

+4.3

including:

 

 

Private enterprises

26,878

8.7

30,044

9.1

19,607

20,011

+2.1

Pensions, assistance etc.

28,957

9.3

29,893

9.1

22,155

23,179

+4.6

Social insurance funds

112,577

36.2

116,878

35.5

90,081

94,091

+4.5

Other asset transfers

764

0.2

834

0.3

649

670

+3.2

Investment expenditure

33,183

10.7

36,071

11.0

18,140

20,629

+13.7

Financial assistance

24,358

7.8

26,035

7.9

13,011

14,730

+13.2

Grants and subsidies

22,787

7.3

22,639

6.9

11,955

12,664

+5.9

Loans, guarantees

1,069

0.3

1,927

0.6

736

799

+8.6

Acquisition of holdings; capital contributions

501

0.2

1,469

0.4

320

1,267

+295.9

Fixed asset investment

8,825

2.8

10,037

3.0

5,128

5,899

+15.0

Construction measures

6,846

2.2

7,533

2.3

4,066

4,636

+14.0

Acquisition of movable assets

1,480

0.5

1,846

0.6

773

946

+22.4

Acquisition of real property

499

0.2

658

0.2

289

318

+10.0

General reduction/increase in expenditure

0

0.0

-2,940

-0.9

0

0

X

Total expenditure1

310,581

100.0

329,100

100.0

231,684

243,790

+5.2

Fiscal balance

Expenditure exceeded revenue by €6.4bn in the first nine 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 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

September

Year‑on‑year
change

January to

September

Year‑on‑year
change

2017 estimates4

Year‑on‑year
change

in €m

in %

in €m

in %

in €m

in %

Joint taxes

 

 

 

 

 

 

Wages tax2

14,580

+2.5

140,817

+6.2

194,250

+5.1

Assessed income tax

13,498

+6.4

44,555

+13.1

57,500

+6.8

Non-assessed taxes on earnings

887

 -6.2

17,133

+9.2

19,450

+0.0

Final withholding tax on interest and capital gains

402

+16.4

5,464

+22.6

6,548

+10.2

Corporation tax

5,826

+8.2

22,416

+5.2

27,080

 -1.3

Value added taxes (VAT)

18,518

+4.7

168,227

+4.5

227,550

+4.8

Trade tax apportionment

4

+288.8

2,593

+14.3

4,658

+9.9

Increased trade tax apportionment

4

+283.1

2,119

+11.1

3,879

+7.9

Total joint taxes

53,719

+4.8

403,324

+6.5

540,915

+4.7

Federal taxes

Energy duty

3,427

+0.8

25,400

+3.1

40,200

+0.3

Tobacco duty

1,337

+14.2

10,138

+2.7

14,190

+0.0

Spirits duty incl. alcopops duty

161

 -1.8

1,556

+1.2

2,070

 -0.0

Insurance tax

704

+18.8

11,199

+4.4

13,200

+3.4

Electricity duty

567

+3.5

5,158

+6.5

6,600

+0.5

Motor vehicle tax

694

 -3.6

7,042

 -0.2

9,000

+0.5

Aviation tax

108

+5.5

782

+6.4

1,125

+4.8

Nuclear fuel duty

0

X

-7,261

X

0

X

Solidarity surcharge

2,040

+4.6

13,276

+7.2

17,600

+4.4

Other federal taxes

124

+2.8

1,056

 -0.2

1,458

 -0.0

Total federal taxes

9,160

+3.8

68,347

 -6.6

105,443

+1.0

Länder taxes

Inheritance tax

525

 -1.2

4,676

 -14.2

6,010

 -14.2

Real property transfer tax

1,106

+11.6

9,883

+7.2

12,730

+2.6

Betting and lottery tax

137

 -13.0

1,381

+2.4

1,870

+3.4

Beer duty

63

 -3.9

509

 -0.8

671

 -1.0

Other Länder taxes

32

+1.3

373

+4.9

453

+2.6

Total Länder taxes

1,864

+4.9

16,821

 -0.4

21,734

 -2.7

EU own resources

Customs duty

457

+1.9

3,819

 -0.0

5,200

+1.7

VAT-based own resources

197

 -44.4

1,772

 -44.4

2,450

 -42.4

GNI-based own resources

1,579

 -13.4

9,482

 -34.2

18,200

 -8.6

Total EU own resources

2,233

 -15.0

15,073

 -29.6

25,850

 -11.7

Federation3

29,996

+6.2

223,322

+5.2

308,028

+6.6

Länder 3

28,211

+4.5

220,924

+5.8

294,824

+2.1

EU

2,233

 -15.0

15,073

 -29.6

25,850

 -11.7

Local authorities’ share of income tax and value added tax

4,759

+6.4

32,992

+10.2

44,590

+7.8

Total tax revenue (excluding local authority taxes)

65,200

+4.6

492,311

+4.2

673,292

+3.9

Tax revenue in September 2017

Total tax revenue (excluding local authority taxes) recorded a year-on-year increase of 4.6% in September 2017. This increase was driven mainly by revenue from joint taxes, which continued its strong upward trend with a gain of 4.8%. September, a month in which a lot of tax prepayments are made, showed sharp gains in revenue from assessed income tax and corporation tax. Revenue from taxes that accrue solely to the Federation was up by 3.8% on the year, while receipts from taxes accruing solely to the Länder rose by 4.9%.

EU own resources

Payments of own resources to the EU, including customs duties, fell by 15.0% in September 2017 compared with the same month last year. Taken cumulatively, own resources payments were down sharply on the year in the first nine months of 2017. 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.

Cumulative overview of the January–September 2017 period

Total tax receipts were up by 4.2% on the year in the first nine months of 2017, an increase that resulted from the above-average rise in receipts from joint taxes (+6.5%). In contrast, yields from taxes accruing solely to the Federation and from taxes accruing solely to the Länder posted drops of 6.6% and 0.4% 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 6.2% on the year in September 2017. This trend was driven by three factors: Firstly, revenue from federal taxes rose by 3.8%; secondly, there was a 4.1% rise in the Federation’s share of revenue from joint taxes, thirdly, payments owed by the Federation to the European Union and to the Länder were lower in September.

Länder tax receipts posted a year-on-year gain of 4.5% in September, after accounting for supplementary federal grants. This was due to an increase in revenue both from joint taxes (+5.1%) and from taxes accruing to the Länder (+4.9%). The local authorities’ share of revenue from joint taxes was up by 6.4% on the year.

Joint taxes

Wages tax

The upward trend in wages tax revenue seen in recent months continued in September 2017, buoyed by sustained positive employment trends and rising wages. Gross revenue from wages tax increased by 2.4% on the year. Child benefit payments, which are financed from wages tax receipts, were up by 2.0% compared with the same month last year. Hence cash receipts from wages tax posted an increase of 2.5%. The fact that the growth rate has been below average over the course of the year is due to a very high baseline figure in the previous year. Cash receipts from wages tax were up by 6.2% on the year in the period from January to September 2017.

Corporation tax

Gross receipts from corporation tax were up by 8.0% in September, a month when prepayments are due from taxpayers. Prepayments experienced a major boost in terms of volume, and disbursed refunds were also up, while back-payments were down slightly on the year. Cash receipts from corporation tax for the January–September 2017 period were up by 5.2% on the year. However, a high volume of corporation tax refunds is still expected due to high court rulings.1

Assessed income tax

As was the case for corporation tax, prepayments were due for assessed income tax in September, too. Revenue from tax payments in September generally account for a quarter of the annual total. Moreover, gross revenue from assessed income tax was again up sharply by 4.6% over September 2017. Revenue was boosted primarily by a rise in prepayments. After subtracting refunds disbursed to assessed employees in accordance with section 46 of the Income Tax Act (Einkommensteuergesetz) and after subtracting owner-occupied home premiums and investment grants, whose volume has now fallen to an inconsequential level, cash receipts from assessed income tax increased by 6.4% in September 2017. In cumulative terms, revenue from assessed income tax was up by 13.1% on the year in the period from January to September 2017.

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. After a strong increase in gross revenue from non-assessed taxes on earnings in August 2017, this revenue fell by 2.0% in September in purely numerical terms. It is highly probable that there was a shift between 2016 and 2017 in the timing of dividend payments over the course of the year, resulting in diverging due dates for tax payments and thus also in diverging payment dates for taxes. Refunds paid out by the Federal Central Tax Office, which are subtracted from revenue totals, also increased. On balance, cash receipts from non-assessed taxes on earnings fell by 6.2% on the year in September. Overall, however, receipts from non-assessed taxes on earnings posted a year-on-year gain of 9.2% in the period from January to September 2017.

Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains increased by 16.4% in September, continuing the positive trend which has been noticeable for this type of tax since February 2017. 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. 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 withholding tax on interest and capital gains was up by 22.6% on the year in the period from January to September 2017.

Value added taxes

Revenue from value added taxes rose by 4.7% in September. Receipts from domestic VAT posted an increase of just under 3.6%. Up by 7.7%, revenue from import VAT posted a far stronger increase. For the nine months from January to September 2017, value added tax revenue was up by 4.5% on the year.

Taxes accruing to the Federation

Revenue from taxes that accrue solely to the Federation increased by 3.8% in September 2017. Certain high-revenue federal taxes recorded significant rises in September 2017, for example energy duty (with revenue up 0.8%), tobacco duty (+14.2%), the solidarity surcharge (+4.6%), insurance tax (+18.8%) and electricity duty (+3.5%). Motor vehicle tax receipts were down by 3.6%. On a cumulative basis, revenue from taxes accruing solely to the Federation fell by 6.6% in the period from January to September 2017 due to refunds for nuclear fuel duty following the Federal Constitutional Court’s ruling of 13 April 2017.

Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder rose in September 2017, posting a gain of 4.9% on the year. This was mainly due to revenue from real property transfer tax, which posted a year-on-year increase of 11.6%. Revenue was down for inheritance tax (-1.2%), beer duty (-3.9%) and betting and lottery tax (-13.0%). Revenue from Länder taxes was down slightly, by 0.4% on the year, for the period from January to September 2017.

Footnotes

1
Federal Fiscal Court rulings on the STEKO case and on section 40 of the Capital Investment Companies Act.