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20 April 2018

April 2018 month­ly re­port

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

Federal budget trends up to and including March 2018

Trends in the federal budget

 

Actual 2017

Actual1 as of March 2018

Expenditure (€bn)2

325.4

85.8

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

+1.6

Revenue (€bn)2

330.4

81.5

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

-0.1

Tax revenue (€bn)

309.4

75.2

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

-2.3

Fiscal balance (€bn)

5.0

-4.3

Financing/use of surplus:

-5.0

4.3

Cash resources (€bn)

-

43.5

Seigniorage (€bn)

0.3

-0.2

Reserve funds balance (€bn)

5.3

0.0

Net borrowing/current financial market balance3 (€bn)

0.0

-39.0

An interim budget – based mainly on Article 111 of the Basic Law – is currently in place in Germany (see the article entitled “Vorläufige Haushaltsführung 2018” [“2018 Interim Budget Management”] in the German version of the January 2018 monthly report). Interim budget management will end when the 2018 budget is promulgated in the Federal Law Gazette. This is expected to occur in July 2018. The following tables do not include any target values, as these have yet to be determined for the 2018 federal budget.

Revenue

Taken cumulatively, federal revenue totalled €81.5bn in the first quarter of 2018. This means that federal revenue remained roughly unchanged compared with the first quarter of last year. Tax revenue (including EU own resources) was down by 2.3% on the year and had a negative impact on quarterly figures, mainly as a result of a baseline effect involving GNI-based own resources – more specifically, payments of own resources were much lower on the year in the first quarter of 2017 largely due to the effects of the new Own Resources Decision.

Other revenue posted a year-on-year gain of €1.6bn (+35.4%) in the first quarter of 2018. This was mainly due to an increase in allocations from the Bundesbank’s profits which, at €1.9bn, were up by €1.5bn over the same period last year.

Trends in federal revenue

Actual

2017

Actual

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

January to March 2017

Januar to March 2018

€m

Share
in %

€m

I. Tax revenue

309,376

93.6

76,936

75,185

 -2.3

Federal share of joint taxes:

252,630

76.5

61,147

63,752

+4.3

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

136,685

41.4

31,986

33,991

+6.3

of which:

Wages tax

83,121

25.2

17,577

18,669

+6.2

Assessed income tax

25,256

7.6

7,229

7,498

+3.7

Non-assessed taxes on earnings

10,451

3.2

1,818

1,758

 -3.3

Final withholding tax on interest and capital gains

3,227

1.0

1,107

1,356

+22.5

Corporation tax

14,629

4.4

4,255

4,709

+10.7

Value added taxes (VAT)

114,005

34.5

29,054

29,688

+2.2

Trade tax apportionment

1,941

0.6

107

74

 -30.8

Energy duty

41,022

12.4

4,812

4,865

+1.1

Tobacco duty

14,399

4.4

2,637

2,425

 -8.0

Solidarity surcharge

17,953

5.4

4,324

4,587

+6.1

Insurance tax

13,269

4.0

6,178

6,388

+3.4

Electricity duty

6,944

2.1

1,746

1,725

 -1.2

Motor vehicle tax

8,948

2.7

2,536

2,602

+2.6

Nuclear fuel tax

-7,262

-2.2

0

0

X

Spirits duties

2,096

0.6

578

592

+2.4

Coffee duty

1,057

0.3

249

243

 -2.4

Aviation tax

1,121

0.3

190

193

+1.6

Supplementary grants to Länder

-9,229

-2.8

-2,271

-2,026

 -10.8

EU GNI own resources

-14,258

-4.3

-379

-5,197

+1.271.2

EU VAT own resources

-2,362

-0.7

-591

-723

+22.3

Grants to Länder for public transport

-8,348

-2.5

-2,087

-2,124

+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

4,630

6,271

+35.4

Revenue from economic activity

3,868

1.2

450

1,951

+333.6

Interest revenue

344

0.1

53

77

+45.3

Loan repayments, holdings, privatisation revenue

1,786

0.5

246

265

+7.7

Total revenue1

330,401

100.0

81,565

81,456

 -0.1

Expenditure

Federal expenditure in the first quarter of 2018 totalled €85.8bn, up by 1.6% (€1.4bn) on the year. Federal spending is separated into consumption and investment expenditure. In the first quarter of 2018, consumption spending was 1.3% higher than in the first quarter of 2017. This was due mainly to increases in human resources expenditure (up 2.2%) and ongoing grants to public administrations (up 23.3%). This latter category includes, in particular, federal grants to reimburse the Länder for social spending on basic income support for older people and for people with reduced earning capacity. This spending totalled roughly €900m in the fourth quarter of 2017, but the reimbursements were paid from the 2018 budget. A corresponding situation had not occurred in the first quarter of 2017, because all such reimbursements in the fourth quarter of 2016 were covered by the 2016 budget, thanks to a supplementary budget for 2016 that was adopted in late March 2017. Grants for other areas in the first quarter of 2018 were down slightly on the year, mainly due to a decline in the volume of grants to companies (12.6%) and grants for pensions and benefits (such as basic income support for jobseekers, 2.4%). Social security spending, in contrast, was up by 2.9% on the year. A decline in operating expenditure (by 2.6% on the year) also tempered the increase in consumption spending. Investment spending was up sharply by 5.5% on the year in the first quarter of 2018. This development was led by higher spending on financial assistance, particularly (a) grants to a special fund for investing in the expansion of childcare facilities and (b) subsidies to other areas. In contrast, fixed asset investment was down on the year in the first quarter of 2018.

Trends in federal expenditure by function

Actual

2017

Actual

Year‑on‑year

change in %
(year to date)

January to March 2017

January to March 2018

m

Share

in %

€m

General public services

77,006

 23.7

18,348

18,345

 -0.0

Economic cooperation and development

8,330

 2.6

2,000

1,641

 -18.0

Defence

36,419

 11.2

8,663

8,833

+2.0

Government, central administration

15,858

 4.9

4,407

4,592

+4.2

Revenue administration

4,554

 1.4

1,075

1,131

+5.2

Education, science, research, cultural affairs

22,984

 7.1

4,079

3,469

 -15.0

Support for school and university students and training programme participants

3,603

 1.1

1,056

966

 -8.6

Science, research and development outside of higher education institutions

12,268

 3.8

1,561

1,449

 -7.2

Social security, family and youth affairs, labour market policy

168,801

 51.9

47,696

49,688

+4.2

Social insurance including unemployment insurance

111,703

 34.3

34,364

35,364

+2.9

Labour market policy

37,590

 11.6

9,163

9,116

 -0.5

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

21,423

 6.6

5,655

5,521

 -2.4

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

6,753

 2.1

1,546

1,719

+11.2

Family assistance, welfare services, etc.

8,296

 2.5

2,132

2,252

+5.6

Social benefits for the consequences of war and political events

1,930

 0.6

618

561

 -9.2

Health, environment, sport, recreation

2,303

 0.7

436

388

 -11.0

Housing, regional planning and local community services

2,923

 0.9

642

601

 -6.3

Housing, home ownership savings premium

2,267

 0.7

561

508

 -9.5

Food, agriculture and forestry

1,068

 0.3

114

110

 -3.4

Energy and water supply, trade and services

4,195

 1.3

1,528

1,477

 -3.3

Regional support measures

726

 0.2

60

57

 -4.4

Mining, manufacturing and construction

1,532

 0.5

1,095

1,067

 -2.6

Transport and communication

21,228

 6.5

3,448

3,475

+0.8

Roads

9,484

 2.9

1,341

1,339

 -0.2

Railways and public transport

7,047

 2.2

932

1,134

+21.6

Financial management

30,532

 9.4

8,198

8,304

+1.3

Interest expenditure

17,500

 5.4

6,554

6,622

+1.0

Total expenditure1

325,380

 100.0

84,407

85,768

+1.6

Trends in federal expenditure by economic category

Actual

2017

Actual

Year‑on‑year

change in %
(year to date)

January to

March 2017

January to

March 2018

€m

Share
in %

€m

Consumption expenditure

291,367

89.5

78,784

79,838

+1.3

Personnel expenditure

31,824

9.8

8,679

8,868

+2.2

Salary payments

23,182

7.1

6,170

6,368

+3.2

Pensions

8,643

2.7

2,509

2,499

 -0.4

Current material expenditure

28,693

8.8

5,636

5,491

 -2.6

Non-personnel expenditure

1,571

0.5

335

317

 -5.4

Military procurement

10,625

3.3

1,623

1,657

+2.1

Other

16,498

5.1

3,679

3,517

 -4.4

Interest expenditure

17,497

5.4

6,553

6,621

+1.0

Current grants and subsidies

212,582

65.3

57,608

58,570

+1.7

to public administration

24,814

7.6

4,791

5,908

+23.3

to other sectors

187,768

57.7

52,817

52,662

 -0.3

including:

Private enterprises

28,527

8.8

6,888

6,017

 -12.6

Pensions, assistance etc.

30,127

9.3

8,019

7,893

 -1.6

Social insurance funds

117,495

36.1

35,576

36,596

+2.9

Other asset transfers

770

0.2

308

288

 -6.5

Investment expenditure

34,013

10.5

5,623

5,930

+5.5

Financial assistance

24,170

7.4

4,392

4,766

+8.5

Grants and subsidies

21,421

6.6

4,120

4,538

+10.1

Loans, guarantees

1,221

0.4

160

116

 -27.5

Acquisition of holdings; capital contributions

1,528

0.5

113

113

+0.0

Fixed asset investment

9,843

3.0

1,230

1,164

 -5.4

Construction measures

7,631

2.3

861

788

 -8.5

Acquisition of movable assets

1,713

0.5

281

265

 -5.7

Acquisition of real property

499

0.2

89

111

+24.7

General reduction/increase in expenditure

0

0.0

0

0

X

Total expenditure1

325,380

100.0

84,407

85,768

+1.6

Fiscal balance

The federal budget recorded a deficit of €4.3bn in the first quarter of 2018.

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

March

Year‑on‑year
change

January to

March

Year‑on‑year
change

2018 estimates4

Year‑on‑year
change

in €m

in %

in €m

in %

in €m

in %

Joint taxes

           

Wages tax2

15,022

+6.3

48,059

+6.1

205,200

+4.9

Assessed income tax

15,369

+2.5

17,640

+3.7

60,950

+2.6

Non-assessed taxes on earnings

1,353

 -19.3

3,512

 -3.7

19,880

 -5.0

Final withholding tax on interest and capital gains

427

 -16.9

3,083

+22.5

7,500

+2.3

Corporation tax

8,160

+4.2

9,418

+10.7

30,650

+4.8

Value added taxes (VAT)

16,034

+0.7

59,248

+3.0

234,450

+3.6

Trade tax apportionment

13

+57.5

178

 -31.2

4,718

+0.7

Increased trade tax apportionment

8

+107.6

113

 -37.1

3,868

 -0.7

Total joint taxes

56,383

+2.4

141,252

+4.7

567,216

+3.6

Federal taxes

Energy duty

3,150

+2.5

4,865

+1.1

41,000

 -0.1

Tobacco duty

1,102

 -10.7

2,425

 -8.0

14,360

 -0.3

Spirits duty incl. alcopops duty

142

+13.6

591

+2.3

2,080

 -0.6

Insurance tax

735

+1.6

6,388

+3.4

13,520

+1.9

Electricity duty

594

 -17.8

1,725

 -1.2

6,930

 -0.2

Motor vehicle tax

958

+4.1

2,602

+2.6

9,010

+0.7

Aviation tax

83

+7.3

193

+1.7

1,175

+4.9

Nuclear fuel duty

0

X

0

X

0

X

Solidarity surcharge

2,227

+3.0

4,587

+6.1

18,450

+2.8

Other federal taxes

100

 -0.1

376

+3.4

1,463

+1.2

Total federal taxes

9,091

 -0.5

23,752

+1.7

107,988

+8.1

Länder taxes

Inheritance tax

492

 -23.9

1,431

 -12.8

5,767

 -5.7

Real property transfer tax

1,222

+5.3

3,576

+6.4

13,820

+5.2

Betting and lottery tax

155

+3.6

479

 -2.3

1,881

+2.4

Beer duty

44

 -9.7

142

 -1.3

659

 -0.8

Other Länder taxes

155

+3.3

207

+4.0

465

+3.1

Total Länder taxes

2,069

 -4.1

5,836

+0.0

22,592

+1.7

EU own resources

Customs duty

452

+15.0

1,271

+3.9

5,250

+3.7

VAT-based own resources

201

+27.6

723

+22.5

2,510

+6.3

GNI-based own resources

1,868

+37.8

5,197

+1.269.7

24,440

+71.4

Total EU own resources

2,521

+32.3

7,191

+227.8

32,200

+48.5

Federation3

30,795

 -0.1

76,971

 -2.1

315,797

+2.1

Länder 3

29,552

+1.3

75,811

+3.4

306,787

+2.8

EU

2,521

+32.3

7,191

+227.8

32,200

+48.5

Local authorities’ share of income tax and value added tax

5,127

+5.5

12,136

+8.4

48,262

+6.9

Total tax revenue (excluding local authority taxes)

67,995

+1.9

172,110

+4.1

703,046

+4.2

Tax revenue in March 2018

Total tax revenue in March 2018 (excluding local authority taxes) was up by 1.9% over the same month last year. Revenue growth continued to be driven by the yield from joint taxes, which climbed by 2.4% on the year. Due to the high 2017 baseline, this relatively modest pace of growth was expected. Receipts from wages tax, assessed income tax and corporation tax posted marked gains. In contrast, the revenue results for withholding tax on interest and capital gains and for value added taxes were generally subdued or exhibited a downward trend. The yield from taxes accruing solely to the Federation posted a slight year-on-year decline of 0.5%. Revenue from taxes accruing solely to the Länder contracted as well, by 4.1%.

EU own resources

Transfers of own resources to the EU, including customs duties, increased to approximately €2.5bn in March 2018. This represented a year-on-year gain of 32.3% over 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 led to a significant reduction in transfers in 2017. In addition, the annual amount of GNI-based own resources that Germany had to pay to the EU was set 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.

Overview of the January–March 2018 period

Total tax receipts posted a year-on-year gain of 4.1% in the first quarter of 2018. Broken down by category, revenue from joint taxes was up by 4.7%, receipts from federal taxes were up by 1.7%, and the yield from Länder taxes was basically unchanged.

Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants to the Länder) were down slightly on the year in March 2018, by 0.1%. Overall tax receipts for the Länder saw a small year-on-year gain of 1.3% in March despite the decline in revenue from Länder taxes, thanks to a slight increase in the share of joint taxes allocated to the Länder. The marked increase in transfers of EU own resources from the federal budget further weakened the statistical results for federal revenue trends. Local authorities’ share of revenue from joint taxes was up by 5.5% on the year.

Joint taxes

Wages tax

Revenue from wages tax again recorded strong growth in March 2018, with gross receipts registering a 4.8% gain on the year. This outcome reflects the positive trends in both employment and wages. Child benefit payments – which are financed from wages tax receipts – declined slightly on the year by 1.7%, but this figure was significantly distorted by a change in the underlying statistical data. Absent this effect, child benefit payments would have posted a 1.7% gain, and the increase in gross wages tax receipts would have amounted to only 4.1%. Nevertheless, this effect did not have an impact on cash receipts, which were up by 6.3% on the year in March. Taken cumulatively, cash receipts from wages tax were up by 6.1% on the year in the first quarter of 2018.

Corporation tax

Corporation tax receipts recorded a strong year-on-year gain of 4.3% in March, a month when corporation tax prepayments are due and revenue is traditionally high. Prepayments were up sharply, while refunds saw only a minor increase and back-payments declined slightly. Investment grants, which are subtracted from gross corporation tax receipts, showed a slightly higher volume of repayments over disbursements in March. In the end, cash receipts from corporation tax rose by 4.2% on the year in March. For the first quarter as a whole, cash receipts from wages tax were up by 10.7% on the year.

Assessed income tax

Gross revenue from assessed income tax was up by 0.2% on the year in March, a month when prepayments of this tax are due. The size of this increase is relatively small compared with previous years. Prepayments were up by only 1% over the very high baseline figure from last year. After subtracting employee refunds (as well as investment allowance payments and owner-occupied homes premiums, which are insignificant in terms of amount), net cash receipts from income tax were up by 2.5% on the year in March 2018. This modest pace of growth was expected due to the high baseline figure from March 2017, when revenue from assessed income tax surged by 14.2%. In cumulative terms, cash receipts from assessed income tax were up by 3.7% on the year in the first quarter of 2018.

Non-assessed taxes on earnings

Gross receipts from non-assessed taxes on earnings fell by 11.4% on the year in March. Combined with the increase in refunds paid out by the Federal Central Tax Office, which are financed from this revenue, cash receipts from non-assessed taxes on earnings were down by 19.3% in March 2018. Revenue from these taxes shows a high level of volatility over the course of the year, depending on how companies schedule their dividend payments. For the first quarter as a whole, cash receipts from non-assessed taxes on earnings posted a year-on-year decline of 3.7%.

Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains was down by 16.9% on the year in March 2018. This is probably due to a year-on-year decline in tax revenue from capital gains. In cumulative terms, cash receipts from final withholding tax on interest and capital gains were up by 22.5% on the year in the first quarter of 2018.

Value added taxes

The yield from from value added taxes was up slightly on the year in March, by 0.7%. Receipts from domestic VAT climbed by 0.3% on the year, while import VAT revenue grew by 1.6%. On a cumulative basis, cash receipts from value added taxes recorded a year-on-year gain of 3.0% in the first quarter of 2018.

Taxes accruing to the Federation

Revenue from taxes accruing solely to the Federation declined slightly by 0.5% on the year in March. Taxes posting revenue growth included insurance tax (up 1.6%), solidarity surcharge (up 3.0%), energy duty (up 2.5%) and motor vehicle tax (up 4.1%). In contrast, tobacco duty, electricity duty and coffee duty were down on the year (by 10.7%, 17.8% and 2.6%, respectively). 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 fell by 4.1% in year-on-year terms in March 2018. Taxes showing revenue growth included real property transfer tax (up 5.3%), betting and lottery tax (up 3.6%) and fire protection tax (up 3.3%). In contrast, inheritance tax receipts posted a sharp year-on-year drop of 23.9%. The yield from beer duty was also down on the year, by 9.7%.