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21 December 2017

De­cem­ber 2017 month­ly re­port

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

Federal budget trends up to November 2017

Trends in the federal budget

 

Actual 2016

Estimated 2017

Actual1 January to November 2017

Expenditure (€bn)2

310.6

329.1

298.2

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

+5.7

Revenue (€bn)2

316.8

322.1

282.2

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

+2.0

Tax revenue (€bn)

289.0

301.0

263.4

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

+5.1

Fiscal balance (€bn)

6.2

-7.0

-16.1

Financing/use of surplus:

-6.2

7.0

16.1

Cash resources (€bn)

-

-

36.6

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

-20.7

Revenue trends

Federal revenue for the period from January up to and including November 2017 totalled €282.2bn. This is equivalent to 88% of the target revenue for the federal budget for the entire year and represents a year-on-year gain of 2.0% (€5.5bn). Tax revenue posted a strong gain on the year (+5.1%, or approximately €12.8bn). This figure already includes the repayment of nuclear fuel duty to energy companies (including the corresponding legal costs) totalling €7.3bn following 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. Other revenue fell significantly short of last year’s figure (down by roughly €7.3bn, or 28%), dampening the rise in revenue. This was mainly because allocations from the Bundesbank’s profits were about €2.8bn lower than in 2016.

Trends in federal revenue

Actual

2016

Estimated

2017

Actual

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

January to November 2016

January to November 2017

€m

Share
in %

€m

Share

in %

€m

I. Tax revenue

288,991

91.2

301,029

93.5

250.602

263.403

+5,1

Federal share of joint taxes:

235,747

74.4

246,469

76.5

206.749

217.577

+5,2

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

127,463

40.2

130,187

40.4

103.999

112.086

+7,8

of which:

 

 

Wages tax

78,519

24.8

82,939

25.8

66.641

70.874

+6,4

Assessed income tax

22,879

7.2

23,026

7.1

16.582

18.688

+12,7

Non-assessed taxes on earnings

9,731

3.1

9,610

3.0

8.537

9.381

+9,9

Final withholding tax on interest and capital gains

2,613

0.8

2,306

0.7

2.258

2.825

+25,1

Corporation tax

13,721

4.3

13,249

4.1

9.980

10.318

+3,4

Value added taxes (VAT)

106,529

33.6

114,436

35.5

101.374

103.957

+2,5

Trade tax apportionment

1,755

0.6

1,846

0.6

1.375

1.535

+11,6

Energy duty

40,091

12.7

39,796

12.4

31.706

32.508

+2,5

Tobacco duty

14,186

4.5

14,700

4.6

12.264

12.525

+2,1

Solidarity surcharge

16,855

5.3

17,450

5.4

14.119

15.102

+7,0

Insurance tax

12,763

4.0

13,050

4.1

12.154

12.611

+3,8

Electricity duty

6,569

2.1

6,530

2.0

5.946

6.289

+5,8

Motor vehicle tax

8,952

2.8

8,900

2.8

8.352

8.383

+0,4

Nuclear fuel tax

422

0.1

0

0.0

422

-7.262

X

Spirits duties

2,072

0.7

2,051

0.6

1.873

1.904

+1,7

Coffee duty

1,040

0.3

1,050

0.3

939

949

+1,1

Aviation tax

1,074

0.3

1,101

0.3

937

1.000

+6,7

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

-18.061

-12.637

 -30,0

EU VAT own resources

-4,250

-1.3

-2,440

-0.8

-3.896

-2.165

 -44,4

Grants to Länder for public transport

-8,200

-2.6

-8,144

-2.5

-6.791

-7.652

+12,7

Grants to Länder for motor vehicle tax and HGV toll

-8,992

-2.8

-8,992

-2.8

-8.992

-8.992

+0,0

II. Other revenue

27,839

8.8

21,021

6.5

26.043

18.760

 -28,0

Revenue from economic activity

6,847

2.2

5,468

1.7

6.267

3.493

 -44,3

Interest revenue

302

0.1

300

0.1

220

270

+22,7

Loan repayments, holdings, privatisation revenue

2,890

0.9

1,800

0.6

2.511

1.324

 -47,3

Total revenue1

316,829

100.0

322,051

100.0

276,645

282,163

+2,0

Expenditure trends

Federal expenditure for the first eleven months of 2017 totalled €298.2bn, roughly 90% of the budgeted spending for 2017. This represents a total increase of 5.7% (€16.2bn) on the year.

Federal spending is separated into consumption and investment expenditure. Consumption spending was up by 5.1% on the year in the eleven-month period from January to November 2017. A slight increase in interest payments (+0.8%) and a below-average rise in human resources expenditure (+3.8%) had a dampening effect. Approximately 94% of the budgeted expenditure has already been spent for each of these items. Operating expenditure and ongoing grants to public administrations were up sharply on the year (by 9.1% and 10.1% respectively). The latter includes a 13.7% (€1.9bn) year-on-year increase in ongoing grants to the Länder. Grants for other areas were up by 4.6% on the year, primarily as a result of higher spending on pensions, social security and benefits (e.g. parental benefit, which rose by 6.6%, and basic income support for jobseekers, which was up by 5.6%). Investment expenditure in January–November 2017 was up sharply on the year (+13.0%), driven primarily by a 13.6% rise in investment grants, with a 10.9% increase in investment grants to the Länder, and allocations to increase the equity of Deutsche Bahn AG. Fixed asset investment also surged, increasing by 11.4%. Construction investment, which makes up the largest share of fixed asset investment, contributed to this, with spending increasing by 10.8% on the year.

Trends in federal expenditure by function

Actual

2016

Estimated

2017

Actual

Year‑on‑year

change in %
(year to date)

January to November 2016

January to

November 2017

m

Share

in %

€m

Share

in %

€m

General public services

72,181

 23.2

77,807

 23.6

64,185

67,460

+5.1

Economic cooperation and development

7,732

 2.5

8,501

 2.6

6,405

6,289

 -1.8

Defence

34,613

 11.1

36,620

 11.1

30,858

32,092

+4.0

Government, central administration

14,580

 4.7

16,326

 5.0

13,779

15,060

+9.3

Revenue administration

4,507

 1.5

4,560

 1.4

3,976

4,089

+2.9

Education, science, research, cultural affairs

21,472

 6.9

23,935

 7.3

18,213

18,576

+2.0

Support for school and university students and training programme participants

3,516

 1.1

3,977

 1.2

2,939

3,083

+4.9

Science, research and development outside of higher education institutions

11,406

 3.7

12,729

 3.9

9,256

9,099

 -1.7

Social security, family and youth affairs, labour market policy

160,593

 51.7

170,486

 51.8

152,005

161,076

+6.0

Social insurance including unemployment insurance

106,939

 34.4

111,943

 34.0

104,376

109,003

+4.4

Labour market policy

34,566

 11.1

37,057

 11.3

31,021

34,392

+10.9

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

20,349

 6.6

21,000

 6.4

18,879

19,933

+5.6

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

5,384

 1.7

6,500

 2.0

4,548

6,196

+36.2

Family assistance, welfare services, etc.

8,065

 2.6

8,275

 2.5

7,489

7,661

+2.3

Social benefits for the consequences of war and political events

2,026

 0.7

2,111

 0.6

1,881

1,767

 -6.1

Health, environment, sport, recreation

2,074

 0.7

2,324

 0.7

1,659

1,811

+9.2

Housing, regional planning and local community services

2,427

 0.8

3,324

 1.0

2,130

2,579

+21.1

Housing, home ownership savings premium

1,866

 0.6

2,378

 0.7

1,791

2,207

+23.2

Food, agriculture and forestry

900

 0.3

1,250

 0.4

604

714

+18.2

Energy and water supply, trade and services

4,252

 1.4

6,039

 1.8

3,721

3,614

 -2.9

Regional support measures

719

 0.2

1,585

 0.5

559

557

 -0.4

Mining, manufacturing and construction

1,705

 0.5

1,546

 0.5

1,638

1,471

 -10.2

Transport and communication

18,313

 5.9

20,818

 6.3

15,614

18,341

+17.5

Roads

8,660

 2.8

9,154

 2.8

7,337

7,966

+8.6

Railways and public transport

5,623

 1.8

6,420

 2.0

4,712

6,268

+33.0

Financial management

35,232

 11.3

23,117

 7.0

24,860

24,380

 -1.9

Interest expenditure

17,501

 5.6

18,471

 5.6

17,289

17,426

+0.8

Total expenditure1

310,581

100.0

329,100

 100.0

282,028

298,223

+5.7

Trends in federal expenditure by economic category

Actual

2016

Estimated

2017

Actual

Year‑on‑year

change in %
(year to date)

January to

November 2016

January to

November 2017

€m

Share
in %

€m

Share
in %

€m

Consumption expenditure

277,398

89.3

295,969

89.9

257,919

270,987

+5.1

Personnel expenditure

30,665

9.9

31,988

9.7

29,019

30,123

+3.8

Salary payments

22,269

7.2

23,433

7.1

20,983

21,841

+4.1

Pensions

8,396

2.7

8,555

2.6

8,036

8,282

+3.1

Current material expenditure

26,132

8.4

28,957

8.8

21,372

23,327

+9.1

Non-personnel expenditure

1,506

0.5

1,542

0.5

1,265

1,321

+4.4

Military procurement

9,963

3.2

11,258

3.4

7,770

8,035

+3.4

Other

14,662

4.7

16,157

4.9

12,336

13,971

+13.3

Interest expenditure

17,498

5.6

18,462

5.6

17,286

17,422

+0.8

Current grants and subsidies

202,339

65.1

215,728

65.6

189,528

199,410

+5.2

to public administration

23,648

7.6

26,824

8.2

20,163

22,192

+10.1

to other sectors

178,691

57.5

188,904

57.4

169,365

177,218

+4.6

including:

 

 

Private enterprises

26,878

8.7

30,044

9.1

24,463

25,328

+3.5

Pensions, assistance etc.

28,957

9.3

29,893

9.1

26,913

28,064

+4.3

Social insurance funds

112,577

36.2

116,878

35.5

109,261

114,054

+4.4

Other asset transfers

764

0.2

834

0.3

714

705

 -1.3

Investment expenditure

33,183

10.7

36,071

11.0

24,109

27,236

+13.0

Financial assistance

24,358

7.8

26,035

7.9

17,021

19,342

+13.6

Grants and subsidies

22,787

7.3

22,639

6.9

15,827

17,135

+8.3

Loans, guarantees

1,069

0.3

1,927

0.6

874

936

+7.1

Acquisition of holdings; capital contributions

501

0.2

1,469

0.4

320

1,270

+296.9

Fixed asset investment

8,825

2.8

10,037

3.0

7,088

7,894

+11.4

Construction measures

6,846

2.2

7,533

2.3

5,682

6,293

+10.8

Acquisition of movable assets

1,480

0.5

1,846

0.6

1,018

1,209

+18.8

Acquisition of real property

499

0.2

658

0.2

388

392

+1.0

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

282,028

298,223

+5.7

Fiscal balance

The fiscal deficit of the federal budget was €16.1bn for the period up to and including November 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. Based on the current budgetary trend, it is expected that, despite the current deficit, the reserve fund for asylum-related costs will not be tapped and overall there will not be any net borrowing when the 2017 budget is closed.

Trends in general government tax revenue

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

2017

November

Year‑on‑year
change

January to

November

Year‑on‑year
change

2017 estimates4

Year‑on‑year
change

in €m

in %

in €m

in %

in €m

in %

Joint taxes

 

 

 

 

 

 

Wages tax2

15,083

+6.8

170,780

+6.1

195,800

+5.9

Assessed income tax

-391

X

43,973

+12.7

59,300

+10.2

Non-assessed taxes on earnings

869

+66.3

18,788

+10.0

20,850

+7.2

Final withholding tax on interest and capital gains

501

+47.0

6,420

+23.7

7,198

+21.2

Corporation tax

-376

X

20,636

+3.4

28,500

+3.9

Value added taxes (VAT)

20,491

+6.3

207,196

+4.3

226,600

+4.4

Trade tax apportionment

255

 -4.5

3,705

+11.6

4,651

+9.8

Increased trade tax apportionment

57

 -63.7

3,023

+9.4

3,875

+7.8

Total joint taxes

36,489

+7.5

474,520

+6.2

546,774

+5.9

Federal taxes

Energy duty

3,471

 -0.8

32,508

+2.5

41,050

+2.4

Tobacco duty

1,377

+19.2

12,525

+2.1

14,450

+1.9

Spirits duty incl. alcopops duty

169

+4.1

1,902

+1.6

2,090

+1.0

Insurance tax

817

 -4.0

12,611

+3.8

13,300

+4.2

Electricity duty

558

+5.0

6,289

+5.8

6,900

+5.0

Motor vehicle tax

695

+2.1

8,383

+0.4

8,980

+0.3

Aviation tax

115

+21.9

1,000

+6.7

1,135

+5.7

Nuclear fuel duty

0

X

-7,262

X

-7,261

X

Solidarity surcharge

908

+9.4

15,102

+7.0

17,900

+6.2

Other federal taxes

128

+2.8

1,307

+0.2

1,465

+0.4

Total federal taxes

8,239

+3.9

84,365

 -5.3

100,009

 -4.2

Länder taxes

Inheritance tax

526

+11.4

5,611

 -12.5

6,035

 -13.9

Real property transfer tax

1,120

+7.8

12,059

+7.3

13,270

+6.9

Betting and lottery tax

158

 -6.4

1,687

+1.8

1,855

+2.6

Beer duty

48

 -1.4

610

 -2.4

665

 -1.9

Other Länder taxes

17

 -17.0

412

+2.4

454

+2.8

Total Länder taxes

1,870

+6.8

20,380

+0.2

22,279

 -0.3

EU own resources

Customs duty

399

 -5.2

4,641

 -0.8

5,150

+0.7

VAT-based own resources

197

 -44.4

2,165

 -44.4

2,350

 -44.7

GNI-based own resources

1,579

 -13.4

12,641

 -30.0

14,870

 -25.3

Total EU own resources

2,175

 -16.3

19,447

 -27.0

22,370

 -23.6

Federation3

21,501

+9.2

264,490

+5.1

308,559

+6.8

Länder 3

20,506

+6.8

261,405

+5.5

298,131

+3.3

EU

2,175

 -16.3

19,447

 -27.0

22,370

 -23.6

Local authorities’ share of income tax and value added tax

2,816

+10.7

38,563

+10.0

45,152

+9.2

Total tax revenue (excluding local authority taxes)

46,997

+6.7

583,905

+4.1

674,212

+4.0

Tax revenue in November 2017

Total tax revenue (excluding local authority taxes) increased by 6.7% on the year in November 2017. Rising by 7.5% in November, joint taxes posted an increase which was appreciably higher than in September and October and which functioned as an important motor for the overall revenue trend. In particular, revenue from wages tax, from VAT, and from withholding tax on interest and capital gains posted considerable growth. Yields from taxes that accrue solely to the Federation and taxes that accrue solely to the Länder were both up on the year (by 3.9% and 6.8% respectively).

EU own resources

Transfers of own resources to the EU, including customs duties, fell by 16.3% in November 2017 compared with the same month last year. Taken cumulatively, own resources payments recorded a considerable decline of 27.0% on the year in the first eleven months of 2017. Transfers have declined sharply this year 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. The amount of the monthly transfers is determined by the EU’s financing needs at any given time.

Cumulative overview of the January-November 2017 period

Total tax receipts were up by 4.1% on the year in the first eleven months of 2017. This is a result of an above-average rise in receipts from joint taxes (+6.2%). In contrast, yields from taxes accruing solely to the Federation posted a drop of 5.3%. Yields from taxes that accrue to the Länder have thus far remained roughly at last year’s level (+0.2%).

Distribution among the Federation, Länder and local authorities

Federal tax revenue in November (after accounting for federal supplementary grants) rose sharply on the year (+9.2%). There were three factors driving this development. Firstly, revenue from federal taxes rose by 3.9% on the year; secondly, there was also a 6.8% rise in the Federation’s share of revenue from joint taxes; thirdly, deductions were roughly €0.3bn lower than in November 2016. The main reason for this was a fall in transfers of own resources to the EU and lower federal supplementary grants. These factors combined to produce a positive outcome for the Federation in November. Länder tax receipts posted a year-on-year gain of 6.8%, after accounting for supplementary federal grants. The Länder saw an increase in their share of revenue from joint taxes (+7.8%), mainly as a result of the higher share of VAT revenue apportioned to them. In addition, Länder taxes increased by 6.8%. Local authority revenue from joint taxes was up by 10.7% on the year.

Joint taxes

Wages tax

The upward trend in wages tax revenue seen in recent months continued in November 2017, buoyed by sustained positive employment trends and rising wages. Gross revenue from wages tax increased by 5.6% on the year. Child benefit payments, which are financed from wages tax receipts, were up by 0.7% compared with the same month last year. Cash receipts from wages tax thus rose by 6.8% in November, and by 6.1% on the year in the period from January to November 2017.

Corporation tax

Trends in corporation tax revenue remained positive in November, traditionally a low-revenue month for this tax. In November 2017, net refunds were at approximately €0.4bn. The balance of back payments and refunds resulting from assessment activities decreased slightly in November 2017 compared with the same month last year. After subtracting investment allowance payments (which are financed from corporation tax revenue), disbursements of corporation tax were roughly €0.4bn. Cash receipts from corporation tax were up by 3.4% on the year in the January–November 2017 period.

Assessed income tax

The revenue trend for assessed income tax continued to be very positive as well. Refunds derived from assessment activities stood at €0.4bn in November 2017. In cumulative terms, revenue from assessed income tax was up by 12.7% on the year in the period from January to November 2017.

Non-assessed taxes on earnings

The taxation of dividend distributions by corporations are the main source of revenue in this category, although receipts from this type of tax are strongly influenced by fluctuations in dividend payments over the course of the year. Revenue from these taxes posted an increase of 44.6% in November 2017. Refunds paid out by the Federal Central Tax Office, which are subtracted from revenue totals, were down slightly. As a result, cash receipts from non-assessed taxes on earnings rose by 66.3% on the year. Overall, however, receipts from non-assessed taxes on earnings posted a year-on-year gain of 10.0% in the period from January to November 2017.

Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains increased by 47.0% in October, continuing the positive trend seen since February 2017. Given the ongoing low interest-rate environment, this result cannot be attributed to taxes on interest, but 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 23.7% on the year in the period from January to November 2017.

Value added taxes

Receipts from value added taxes (a high-yielding category of tax) rose by 6.3% in November. Receipts from domestic VAT rose by 7.2%, while revenue from import VAT increased at a slower pace, up by 3.3%. Over the eleven months from January to November 2017, value added tax revenue was up by 4.3% on the year.

Taxes accruing to the Federation

Revenue from taxes that accrue solely to the Federation increased by 3.9% on the year in November. This is primarily because €0.2bn of tobacco duty revenue shifted from October to November, causing tobacco duty revenue to increase by 19.2% on the year in November, following a decrease of 18.4% in October 2017. The following major federal taxes posted revenue gains in November 2017: spirits duty (+4.1%), solidarity surcharge (+9.4%), motor vehicle tax (+2.1%) and electricity duty (+5.0%). Receipts from insurance tax and energy duty were down by 4.0% and 0.8%, respectively. Revenue trends from other taxes had only a minor impact on the results for taxes accruing solely to the Federation. On a cumulative basis, revenue from taxes accruing solely to the Federation fell by 5.3% in the period from January to November 2017. This can be attributed primarily to nuclear fuel duty refunds 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 November 2017, posting a gain of 6.8% on the year. This was primarily due to an increase in inheritance tax receipts (+11.4%) and in real property transfer tax (+7.8%). Revenue was down for fire protection tax (-16.4%), betting and lottery tax (-6.4%) and beer duty (-1.4%). Receipts from taxes accruing solely to the Länder were almost at the same level as in 2016, posting a gain of 0.2% in the period from January to November 2017.