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22 March 2018

March 2018 month­ly re­port

Translated abstract of the Federal Ministry of Finance’s March 2018 monthly report

Federal budget trends up to February 2018

Trends in the federal budget

 

Actual 2017

Actual1 as of February 2018

Expenditure (€bn)2

325.4

62.9

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

+1.2

Revenue (€bn)2

330.4

48.4

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

-2.9

Tax revenue (€bn)

309.4

45.0

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

-4.0

Fiscal balance (€bn)

5.0

-14.5

Financing/use of surplus:

-5.0

14.5

Cash resources (€bn)

-

53.4

Seigniorage (€bn)

0.3

-0.2

Reserve funds balance (€bn)

5.3

0.0

Net borrowing/current financial market balance3 (€bn)

0.0

-38.7

Until the 2018 budget adopted by the German Bundestag is promulgated in the Federal Law Gazette, an interim budget is in place. This is based primarily on Article 111 of the Basic Law (see the article entitled “Vorläufige Haushaltsführung 2018” (“2018 Interim Budget Management”) in the German version of the January 2018 monthly report). Given that the targets for the 2018 federal budget have not been determined, no target values are included in the following tables.

Revenue

Federal revenue for January and February 2018 totalled €48.4bn, a decline of 2.9% (€1.4bn) on the year. Tax revenues were 4.0% lower than they were in the January–February 2017 period. This can be attributed mainly to a baseline effect with GNI-based own resources. As a result of rebates and lower transfers to the EU in the first two months of 2017, net payments of GNI-based own resources to the EU were up significantly in January–February 2018.

Other revenue exceeded last year’s figure by roughly €0.5bn.

Trends in federal revenue

Actual

2017

Actual

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

January to February 2017

Januar to February 2018

€m

Share
in %

€m

I. Tax revenue

309,376

93.6

46,870

44,985

 -4.0

Federal share of joint taxes:

252,630

76.5

35,739

37,855

+5.9

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

136,685

41.4

14,637

16,137

+10.2

of which:

Wages tax

83,121

25.2

11,583

12,298

+6.2

Assessed income tax

25,256

7.6

856

965

+12.7

Non-assessed taxes on earnings

10,451

3.2

975

1,076

+10.4

Final withholding tax on interest and capital gains

3,227

1.0

881

1,169

+32.7

Corporation tax

14,629

4.4

342

629

+83.9

Value added taxes (VAT)

114,005

34.5

20,997

21,649

+3.1

Trade tax apportionment

1,941

0.6

105

70

 -33.3

Energy duty

41,022

12.4

1,740

1,715

 -1.4

Tobacco duty

14,399

4.4

1,402

1,323

 -5.6

Solidarity surcharge

17,953

5.4

2,162

2,360

+9.2

Insurance tax

13,269

4.0

5,455

5,653

+3.6

Electricity duty

6,944

2.1

1,024

1,132

+10.5

Motor vehicle tax

8,948

2.7

1,617

1,644

+1.7

Nuclear fuel tax

-7,262

-2.2

0

0

Spirits duties

2,096

0.6

453

449

 -0.9

Coffee duty

1,057

0.3

170

167

 -1.8

Aviation tax

1,121

0.3

112

110

 -1.8

Supplementary grants to Länder

-9,229

-2.8

0

-15

X

EU GNI own resources

-14,258

-4.3

976

-3,329

X

EU VAT own resources

-2,362

-0.7

-433

-522

+20.6

Grants to Länder for public transport

-8,348

-2.5

-1,391

-1,416

+1.8

Grants to Länder for motor vehicle tax and HGV toll

-8,992

-2.7

-2,248

-2,248

+0.0

II. Other revenue

21,025

6.4

2,947

3,402

+15.4

Revenue from economic activity

3,868

1.2

43

42

 -2.3

Interest revenue

344

0.1

21

43

+104.8

Loan repayments, holdings, privatisation revenue

1,786

0.5

51

111

+117.6

Total revenue1

330,401

100.0

49,817

48,387

 -2.9

Expenditure

Federal expenditure stood at €62.9bn in the first two months of the year, 1.2% (€0.7bn) above last year’s figure. Federal spending is separated into consumption and investment expenditure. Consumption expenditure was up by 0.7% on the year in January–February 2018. This was mainly a result of higher human resources expenditure and operating expenditure (each up by 1.6% on the year). Ongoing grants for public administrations were also significantly higher than in 2017 (+32.0%). This includes ongoing grants for the Länder, which were up by 43.4% (+€0.8bn) over January–February 2017. However, subsidies to other areas were somewhat lower than in January–February 2017, mainly as a result of a 18.6% year-on-year decline in subsidies to companies. Social security spending, in contrast, was up by 3.0% on the year. Spending on pensions and benefits remained practically unchanged. This includes a 1.4% decrease in expenditure on basic income support for jobseekers on the one hand and a 5.5% increase in spending on parental benefit on the other. Moreover, consumption spending was slightly tempered by lower interest payments. Investment spending recorded a marked year-on-year gain of 8.0% in the first two months of 2018. This was mainly the result of higher spending on investment grants, particularly higher transfers to a special fund for investment in the expansion of childcare facilities and higher subsidies to other areas compared with the same period last year. Fixed asset investment was slightly below the 2017 level. In contrast, construction spending was up by 2.3% on the year.

Trends in federal expenditure by function

Actual

2017

Actual

Year‑on‑year

change in %
(year to date)

January to February 2017

January to February 2018

m

Share

in %

€m

General public services

77,006

 23.7

12,541

12,662

+1.0

Economic cooperation and development

8,330

 2.6

1,590

1,271

 -20.0

Defence

36,419

 11.2

5,756

5,966

+3.7

Government, central administration

15,858

 4.9

2,972

3,129

+5.3

Revenue administration

4,554

 1.4

712

739

+3.7

Education, science, research, cultural affairs

22,984

 7.1

3,031

2,191

 -27.7

Support for school and university students and training programme participants

3,603

 1.1

767

627

 -18.3

Science, research and development outside of higher education institutions

12,268

 3.8

1,012

991

 -2.2

Social security, family and youth affairs, labour market policy

168,801

 51.9

33,716

35,455

+5.2

Social insurance including unemployment insurance

111,703

 34.3

25,172

25,909

+2.9

Labour market policy

37,590

 11.6

6,014

5,976

 -0.6

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

21,423

 6.6

3,808

3,755

 -1.4

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

6,753

 2.1

1,025

1,057

+3.1

Family assistance, welfare services, etc.

8,296

 2.5

1,394

1,483

+6.4

Social benefits for the consequences of war and political events

1,930

 0.6

450

422

 -6.2

Health, environment, sport, recreation

2,303

 0.7

298

254

 -14.6

Housing, regional planning and local community services

2,923

 0.9

456

411

 -10.0

Housing, home ownership savings premium

2,267

 0.7

447

399

 -10.9

Food, agriculture and forestry

1,068

 0.3

71

44

 -37.5

Energy and water supply, trade and services

4,195

 1.3

1,341

1,290

 -3.8

Regional support measures

726

 0.2

26

26

 -2.2

Mining, manufacturing and construction

1,532

 0.5

1,060

1,034

 -2.4

Transport and communication

21,228

 6.5

2,346

2,300

 -1.9

Roads

9,484

 2.9

868

886

+2.1

Railways and public transport

7,047

 2.2

606

756

+24.8

Financial management

30,532

 9.4

8,412

8,351

 -0.7

Interest expenditure

17,500

 5.4

7,413

7,233

 -2.4

Total expenditure1

325,380

 100.0

62,156

62,904

+1.2

Trends in federal expenditure by economic category

Actual

2017

Actual

Year‑on‑year

change in %
(year to date)

January to

February 2017

January to

February 2018

€m

Share
in %

€m

Consumption expenditure

291,367

89.5

58,032

58,451

+0.7

Personnel expenditure

31,824

9.8

6,093

6,190

+1.6

Salary payments

23,182

7.1

4,300

4,389

+2.1

Pensions

8,643

2.7

1,793

1,801

+0.4

Current material expenditure

28,693

8.8

3,477

3,533

+1.6

Non-personnel expenditure

1,571

0.5

200

176

 -12.0

Military procurement

10,625

3.3

936

1,094

+16.9

Other

16,498

5.1

2,341

2,263

 -3.3

Interest expenditure

17,497

5.4

7,413

7,232

 -2.4

Current grants and subsidies

212,582

65.3

40,806

41,270

+1.1

to public administration

24,814

7.6

2,608

3,443

+32.0

to other sectors

187,768

57.7

38,198

37,827

 -1.0

including:

Private enterprises

28,527

8.8

5,159

4,198

 -18.6

Pensions, assistance etc.

30,127

9.3

5,361

5,346

 -0.3

Social insurance funds

117,495

36.1

25,876

26,643

+3.0

Other asset transfers

770

0.2

242

225

 -7.0

Investment expenditure

34,013

10.5

4,125

4,453

+8.0

Financial assistance

24,170

7.4

3,458

3,793

+9.7

Grants and subsidies

21,421

6.6

3,242

3,605

+11.2

Loans, guarantees

1,221

0.4

104

76

 -26.9

Acquisition of holdings; capital contributions

1,528

0.5

113

113

+0.0

Fixed asset investment

9,843

3.0

666

660

 -0.9

Construction measures

7,631

2.3

438

448

+2.3

Acquisition of movable assets

1,713

0.5

183

177

 -3.3

Acquisition of real property

499

0.2

46

34

 -26.1

General reduction/increase in expenditure

0

0.0

0

0

X

Total expenditure1

325,380

100.0

62,156

62,904

+1.2

Fiscal balance

The federal budget recorded a deficit of €14.5bn for the January–February 2018 period.

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. This is especially true towards the start of the year. It should also be borne in mind that an interim budget is currently in place.

Trends in general government tax revenue

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

2018

February

Year‑on‑year
change

January to

February

Year‑on‑year
change

2018 estimates4

Year‑on‑year
change

in €m

in %

in €m

in %

in €m

in %

Joint taxes

           

Wages tax2

15,732

+6.7

33,038

+5.9

205,200

+4.9

Assessed income tax

1,287

+23.7

2,271

+12.6

60,950

+2.6

Non-assessed taxes on earnings

626

+28.1

2,159

+9.7

19,880

 -5.0

Final withholding tax on interest and capital gains

1,390

+62.6

2,656

+32.7

7,500

+2.3

Corporation tax

486

+33.1

1,259

+84.2

30,650

+4.8

Value added taxes (VAT)

24,142

+5.9

43,215

+3.9

234,450

+3.6

Trade tax apportionment

147

 -21.8

165

 -34.0

4,718

+0.7

Increased trade tax apportionment

39

+20.6

105

 -40.3

3,868

 -0.7

Total joint taxes

43,848

+8.2

84,869

+6.3

567,216

+3.6

Federal taxes

Energy duty

1,436

 -1.8

1,715

 -1.4

41,000

 -0.1

Tobacco duty

991

+2.0

1,323

 -5.7

14,360

 -0.3

Spirits duty incl. alcopops duty

228

 -4.6

449

 -0.9

2,080

 -0.6

Insurance tax

4,820

+17.7

5,653

+3.6

13,520

+1.9

Electricity duty

546

+9.7

1,132

+10.5

6,930

 -0.2

Motor vehicle tax

739

+0.8

1,644

+1.7

9,010

+0.7

Aviation tax

74

+2.7

110

 -2.1

1,175

+4.9

Nuclear fuel duty

0

X

0

X

0

X

Solidarity surcharge

1,138

+10.2

2,360

+9.2

18,450

+2.8

Other federal taxes

137

 -2.5

276

+4.7

1,463

+1.2

Total federal taxes

10,109

+9.4

14,661

+3.0

107,988

+8.1

Länder taxes

Inheritance tax

453

 -4.3

939

 -5.5

5,767

 -5.7

Real property transfer tax

1,131

+3.5

2,353

+7.1

13,820

+5.2

Betting and lottery tax

150

+0.5

324

 -4.8

1,881

+2.4

Beer duty

44

+8.5

98

+3.1

659

 -0.8

Other Länder taxes

30

+4.3

52

+6.2

465

+3.1

Total Länder taxes

1,808

+1.3

3,767

+2.4

22,592

+1.7

EU own resources

Customs duty

476

+1.5

819

 -1.4

5,250

+3.7

VAT-based own resources

342

+44.7

522

+20.6

2,510

+6.3

GNI-based own resources

3,162

+56.9

3,329

X

24,440

+71.4

Total EU own resources

3,980

+46.3

4,671

+1.519.5

32,200

+48.5

Federation3

25,024

+4.8

46,176

 -3.4

315,797

+2.1

Länder 3

23,739

+6.3

46,260

+4.8

306,787

+2.8

EU

3,980

+46.3

4,671

+1.519.5

32,200

+48.5

Local authorities’ share of income tax and value added tax

3,499

+13.4

7,009

+10.6

48,262

+6.9

Total tax revenue (excluding local authority taxes)

56,241

+8.1

104,115

+5.6

703,046

+4.2

Tax revenue in February 2018

Total tax revenue (excluding local authority taxes) recorded a significant year-on-year gain of 8.1% in February 2018. This trend was underpinned by strong growth in receipts from joint taxes, which were up by 8.2%. Alongside value added taxes and wages tax (two major sources of revenue), final withholding tax on interest and capital gains also posted hefty growth. The sharp 9.4% rise in revenue from federal taxes was primarily due to a temporal shift in insurance tax revenue from January to February, which occurred for technical reasons. Revenue from taxes accruing solely to the Länder recorded moderate growth of 1.3%.

EU own resources

Transfers of own resources to the EU, including customs duties, were up by 46.3% on the year in February 2018 from a low 2017 baseline. Last year, Germany was granted a discount on its VAT-based own resources as a result of the implementation of the Own Resources Decision. This had the effect of reducing transfers in 2017. Moreover, Germany’s annual contribution of GNI-based own resources was also set significantly lower in the 2017 EU budget. Overall, this meant that Germany’s transfers of own resources to the EU were considerably lower in 2017. Transfers to the EU are based on the planned financial framework for 2018, with fluctuations over the course of the year depending on the EU’s financing needs at any given time.

Cumulative overview of the January–February 2018 period

Tax receipts increased by 5.6% overall in the January-February 2018 period. This upward trend was apparent in receipts from joint taxes (6.3%), taxes accruing to the Federation (3.0%), and taxes accruing to the Länder (2.4%).

Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants to the Länder) rose by 4.8% on the year in February 2018. At 6.3%, the increase in the Länder’s tax receipts was significantly higher than the growth in revenue from taxes accruing to the Länder. This is because the Länder received a higher share of joint taxes. The increase in transfers of EU own resources from the federal budget had a strong negative effect on the Federation’s tax revenue. The local authorities’ share of revenue from joint taxes was up by 13.4% on the year.

Joint taxes

Wages tax

Revenue from wages tax again recorded strong growth in February 2018, with gross revenue from this tax increasing by 5.2% on the year. The labour market situation remains favourable. Child benefit payments – which are financed from receipts from wages tax – saw a slight year-on-year rise of only 0.2% in February 2018. However, a change in the underlying statistics in one Land skewed the figures considerably. Without this, the increase in child benefit payments would have stood at approximately 3½%. This would have brought gross wages tax revenue growth up to 5.8%. Cash receipts from wages tax are not impacted by this effect. On balance, these were up by 6.7% on the year in February 2018 and by 5.9% on the year in cumulative terms over the first two months of 2018.

Corporation tax

Gross receipts from corporation tax saw a year-on-year surge of 31.7% in February 2018, although the volume of revenue was low. In February, yields from this tax tend to be determined by assessment activities. The balance between back-payments and refunds remained virtually unchanged compared with the same month of 2017. The revenue growth was a result of a rise in retroactive prepayments. Net investment grants had a slightly negative impact in February 2018. After subtracting them, the year-on-year increase in cash receipts from corporation tax totalled 33.1%. On a cumulative basis, cash receipts from corporation tax increased by 84.2% on the year in January–February 2018.

Assessed income tax

Gross revenue from assessed income tax was up by 12.1% over February 2017. Assessment activities resulted in a considerable rise of about 30% in retroactive prepayments. This compensated for a negative trend in the balance between back-payments and refunds, resulting in a markedly higher assessment result than in February 2017. After subtracting employee refunds, investment allowance payments and owner-occupied homes premiums, net cash receipts from income tax were up by 23.7% in February 2018. In cumulative terms, cash receipts from assessed income tax were up by 12.6% on the year in the January–February 2018 period.

Non-assessed taxes on earnings

February 2018 saw a 5.4% year-on-year rise 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 down by 39.9%, cash receipts from non-assessed taxes on earnings grew by 28.1% in February 2018. Cumulative cash receipts from non-assessed taxes on earnings in January and February 2018 were up by 9.7% on the year.

Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains rose by 62.6% on the year in January 2018. This substantial growth can probably be attributed to an increase in capital gains. However, it is not possible to state definitively what share of the revenue came from interest and what share from capital gains, as no separate statistics are kept on the two revenue components. In cumulative terms, cash receipts from withholding tax on interest and capital gains were up by 32.7% on the year in the January–February 2018 period.

Value added taxes

Revenue from value added taxes posted considerable year-on-year growth of 5.9% over a high February 2017 baseline. Receipts from domestic VAT grew by 4.3% on the year, while the yield from import VAT climbed by 11.9%. Cumulative cash receipts from value added taxes were up by 3.9% on the year in the January–February 2018 period.

Taxes accruing to the Federation

Receipts from taxes accruing solely to the Federation were 9.4% higher than in February last year. The considerable rise in revenue from federal taxes can mainly be attributed to a temporal shift in insurance tax revenue from January to February, which occurred for technical reasons. As a result, the yield from insurance tax grew by 17.7% on the year in February 2018 following a 38.8% decline in January. Solidarity surcharge, electricity tax and tobacco duty all posted revenue gains in February 2018 (up by 10.2%, 9.7% and 2.0%, respectively). In contrast, energy duty, alcohol duty (formerly known as spirits duty) and sparkling wine duty all recorded year-on-year declines (down by 1.8%, 4.6% and 8.3%, respectively). Trends in revenue from other taxes had only a minor impact on the overall results for federal taxes.

Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder were up by 1.3% on the year in February 2018. Gains were recorded for real property transfer tax (up 3.5%), betting and lottery tax (up 0.5%), beer duty (up 8.5%) and fire protection tax (up 4.9%), whereas inheritance tax posted a decline of 4.3%.