Federal budget trends up to and including April 2018

Trends in the federal budget

 

Actual 2017

Actual1 as of April 2018

Expenditure (€bn)2

325.4

111.8

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

+1.9

Revenue (€bn)2

330.4

107.8

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

+0.9

Tax revenue (€bn)

309.4

98.7

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

-1.1

Fiscal balance (€bn)

5.0

-4.0

Financing/use of surplus:

-5.0

4.0

Cash resources (€bn)

-

57.4

Seigniorage (€bn)

0.3

-0.1

Reserve funds balance (€bn)

5.3

0.0

Net borrowing/current financial market balance3 (€bn)

0.0

-53.3

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

Cumulative federal revenue for the four-month period from January to April 2018 totalled €107.8bn, an increase of nearly €1bn or 0.9% over the same period last year. Tax revenue (including EU own resources) was down by 1.1% on the year and had a negative impact on these results, mainly due to 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 €2.1bn (29.4%) in the first four months 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 April 2017

Januar to April 2018

€m

Share
in %

€m

I. Tax revenue

309,376

93.6

99,796

98,655

 -1.1

Federal share of joint taxes:

252,630

76.5

78,805

81,756

+3.7

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

136,685

41.4

40,614

43,196

+6.4

of which:

Wages tax

83,121

25.2

24,458

25,958

+6.1

Assessed income tax

25,256

7.6

7,818

8,154

+4.3

Non-assessed taxes on earnings

10,451

3.2

2,405

2,535

+5.4

Final withholding tax on interest and capital gains

3,227

1.0

1,401

1,632

+16.5

Corporation tax

14,629

4.4

4,531

4,916

+8.5

Value added taxes (VAT)

114,005

34.5

37,821

38,218

+1.0

Trade tax apportionment

1,941

0.6

370

342

 -7.6

Energy duty

41,022

12.4

7,806

8,270

+5.9

Tobacco duty

14,399

4.4

3,855

3,386

 -12.2

Solidarity surcharge

17,953

5.4

5,461

5,785

+5.9

Insurance tax

13,269

4.0

6,928

7,176

+3.6

Electricity duty

6,944

2.1

2,328

2,316

 -0.5

Motor vehicle tax

8,948

2.7

3,293

3,344

+1.5

Nuclear fuel tax

-7,262

-2.2

0

0

Spirits duties

2,096

0.6

718

725

+1.0

Coffee duty

1,057

0.3

347

341

 -1.7

Aviation tax

1,121

0.3

278

291

+4.7

Supplementary grants to Länder

-9,229

-2.8

-2,271

-2,026

+10.8

EU GNI own resources

-14,258

-4.3

-2,073

-6,878

 -231.8

EU VAT own resources

-2,362

-0.7

-787

-904

 -14.9

Grants to Länder for public transport

-8,348

-2.5

-2,783

-2,833

 -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

7,042

9,111

+29.4

Revenue from economic activity

3,868

1.2

1,710

3,674

+114.9

Interest revenue

344

0.1

71

96

+35.2

Loan repayments, holdings, privatisation revenue

1,786

0.5

339

322

 -5.0

Total revenue1

330,401

100.0

106,838

107,767

+0.9

Expenditure

Federal expenditure in the first four months of 2018 totalled €111.8bn, up by €2.1bn or 1.9% on the year. Federal spending is separated into consumption and investment expenditure. In the first four months of 2018, consumption spending was up by 1.7% over the same period last year. This was due mainly to increases in military procurement (up 21.3%) and ongoing grants to public administrations (up 20.9%). 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 not paid until 2018. 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, on the basis of a supplementary budget for 2016 that was not adopted until late March 2017. Grants for other areas increased slightly on the year in the first four months of 2018, while social security spending registered a sizeable increase of 2.9% during the same period. In contrast, interest expenditure fell by 8.4% on the year, thereby tempering the increase in consumption expenditure. Investment spending was up sharply by 4.4% on the year in the first four months 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 slightly on the year in the first four months of 2018.

Trends in federal expenditure by function

Actual

2017

Actual

Year‑on‑year

change in %
(year to date)

January to April 2017

January to April 2018

m

Share

in %

€m

General public services

77,006

 23.7

23,518

23,925

+1.7

Economic cooperation and development

8,330

 2.6

2,313

2,019

 -12.7

Defence

36,419

 11.2

11,201

11,773

+5.1

Government, central administration

15,858

 4.9

5,575

5,842

+4.8

Revenue administration

4,554

 1.4

1,446

1,477

+2.1

Education, science, research, cultural affairs

22,984

 7.1

5,698

5,298

 -7.0

Support for school and university students and training programme participants

3,603

 1.1

1,275

1,207

 -5.4

Science, research and development outside of higher education institutions

12,268

 3.8

2,206

2,230

+1.1

Social security, family and youth affairs, labour market policy

168,801

 51.9

61,970

64,613

+4.3

Social insurance including unemployment insurance

111,703

 34.3

43,706

44,998

+3.0

Labour market policy

37,590

 11.6

12,229

12,159

 -0.6

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

21,423

 6.6

7,479

7,275

 -2.7

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

6,753

 2.1

2,069

2,285

+10.4

Family assistance, welfare services, etc.

8,296

 2.5

2,780

3,002

+8.0

Social benefits for the consequences of war and political events

1,930

 0.6

804

738

 -8.2

Health, environment, sport, recreation

2,303

 0.7

627

562

 -10.3

Housing, regional planning and local community services

2,923

 0.9

1,052

1,002

 -4.7

Housing, home ownership savings premium

2,267

 0.7

959

896

 -6.6

Food, agriculture and forestry

1,068

 0.3

172

159

 -7.6

Energy and water supply, trade and services

4,195

 1.3

1,651

1,676

+1.5

Regional support measures

726

 0.2

83

101

+22.4

Mining, manufacturing and construction

1,532

 0.5

1,136

1,112

 -2.1

Transport and communication

21,228

 6.5

4,850

5,032

+3.8

Roads

9,484

 2.9

2,031

2,161

+6.4

Railways and public transport

7,047

 2.2

1,312

1,539

+17.3

Financial management

30,532

 9.4

10,289

9,646

 -6.3

Interest expenditure

17,500

 5.4

8,121

7,442

 -8.4

Total expenditure1

325,380

 100.0

109,720

111,802

+1.9

Trends in federal expenditure by economic category

Actual

2017

Actual

Year‑on‑year

change in %
(year to date)

January to

April 2017

January to

April 2018

€m

Share
in %

€m

Consumption expenditure

291,367

89.5

101,932

103,672

+1.7

Personnel expenditure

31,824

9.8

11,206

11,356

+1.3

Salary payments

23,182

7.1

8,015

8,139

+1.5

Pensions

8,643

2.7

3,190

3,217

+0.8

Current material expenditure

28,693

8.8

7,374

7,786

+5.6

Non-personnel expenditure

1,571

0.5

432

468

+8.3

Military procurement

10,625

3.3

2,178

2,641

+21.3

Other

16,498

5.1

4,764

4,677

 -1.8

Interest expenditure

17,497

5.4

8,120

7,440

 -8.4

Current grants and subsidies

212,582

65.3

74,831

76,706

+2.5

to public administration

24,814

7.6

6,982

8,440

+20.9

to other sectors

187,768

57.7

67,849

68,266

+0.6

including:

Private enterprises

28,527

8.8

8,959

8,364

 -6.6

Pensions, assistance etc.

30,127

9.3

10,536

10,390

 -1.4

Social insurance funds

117,495

36.1

45,359

46,668

+2.9

Other asset transfers

770

0.2

401

384

 -4.2

Investment expenditure

34,013

10.5

7,788

8,130

+4.4

Financial assistance

24,170

7.4

6,091

6,464

+6.1

Grants and subsidies

21,421

6.6

5,752

6,129

+6.6

Loans, guarantees

1,221

0.4

226

222

 -1.8

Acquisition of holdings; capital contributions

1,528

0.5

113

113

+0.0

Fixed asset investment

9,843

3.0

1,697

1,667

 -1.8

Construction measures

7,631

2.3

1,216

1,178

 -3.1

Acquisition of movable assets

1,713

0.5

376

350

 -6.9

Acquisition of real property

499

0.2

105

138

+31.4

General reduction/increase in expenditure

0

0.0

0

0

X

Total expenditure1

325,380

100.0

109,720

111,802

+1.9

Fiscal balance

The federal budget recorded a deficit of €4.0bn for the four-month period from January to April 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

April

Year‑on‑year
change

January to

April

Year‑on‑year
change

2018 estimates4

Year‑on‑year
change

in €m

in %

in €m

in %

in €m

in %

Joint taxes

           

Wages tax2

17,136

+6.1

65,196

+6.1

206,450

+5.6

Assessed income tax

1,548

+11.5

19,188

+4.3

61,650

+3.7

Non-assessed taxes on earnings

1,614

+26.4

5,126

+4.1

21,900

+4.7

Final withholding tax on interest and capital gains

627

 -6.3

3,710

+16.5

7,895

+7.7

Corporation tax

413

 -25.0

9,832

+8.5

32,330

+10.5

Value added taxes (VAT)

16,997

 -1.8

76,246

+1.9

235,000

+3.8

Trade tax apportionment

921

+1.5

1,098

 -5.7

4,758

+1.6

Increased trade tax apportionment

874

+1.0

987

 -5.6

3,899

+0.1

Total joint taxes

40,131

+2.6

181,383

+4.2

573,882

+4.8

Federal taxes

Energy duty

3,405

+13.7

8,270

+5.9

41,300

+0.7

Tobacco duty

960

 -21.1

3,386

 -12.2

14,160

 -1.7

Spirits duty incl. alcopops duty

134

 -4.4

725

+1.0

2,100

+0.3

Insurance tax

788

+4.9

7,176

+3.6

13,670

+3.0

Electricity duty

591

+1.6

2,316

 -0.5

6,930

 -0.2

Motor vehicle tax

742

 -1.9

3,344

+1.6

9,010

+0.7

Aviation tax

98

+10.4

291

+4.5

1,175

+4.9

Nuclear fuel duty

0

X

0

X

0

X

Solidarity surcharge

1,198

+5.3

5,785

+5.9

18,750

+4.4

Other federal taxes

120

 -2.1

496

+2.0

1,467

+1.5

Total federal taxes

8,036

+3.2

31,788

+2.0

108,562

+8.6

Länder taxes

Inheritance tax

992

+97.1

2,423

+13.0

6,020

 -1.5

Real property transfer tax

1,121

+21.1

4,697

+9.6

13,900

+5.8

Betting and lottery tax

163

+2.8

642

 -1.0

1,851

+0.8

Beer duty

49

 -6.8

192

 -2.8

665

+0.1

Other Länder taxes

29

+2.7

237

+3.9

465

+3.1

Total Länder taxes

2,355

+41.1

8,191

+9.2

22,901

+3.1

EU own resources

Customs duty

405

 -10.1

1,675

+0.1

5,200

+2.7

VAT-based own resources

181

 -8.1

904

+14.8

2,510

+6.3

GNI-based own resources

1,681

 -0.7

6,878

+231.7

22,610

+58.6

Total EU own resources

2,267

 -3.2

9,458

+108.6

30,320

+39.8

Federation3

22,098

+3.3

99,069

 -1.0

321,336

+3.9

Länder 3

23,136

+4.7

98,947

+3.7

310,276

+4.0

EU

2,267

 -3.2

9,458

+108.6

30,320

+39.8

Local authorities’ share of income tax and value added tax

3,426

+7.9

15,563

+8.3

48,613

+7.7

Total tax revenue (excluding local authority taxes)

50,927

+3.9

223,037

+4.0

710,545

+5.3

Tax revenue in April 2018

Total tax revenue in April 2018 (excluding local authority taxes) was up by 3.9% over the same month last year. This positive trend continued to be driven by the yield from joint taxes, which climbed by 2.6% on the year. Wages tax, assessed income tax and non-assessed taxes on earnings all posted strong revenue growth. In contrast, receipts from value added taxes, corporation tax and final withholding tax on interest and capital gains exhibited a downward trend. Revenue from taxes accruing solely to the Federation was up by 3.2% on the year in April, and the yield from taxes accruing solely to the Länder surged by 41.1%.

EU own resources

Transfers of own resources to the EU, including customs duties, fell by 3.2% on the year in April 2018, to roughly €2.3bn. 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–April 2018 period

Total tax receipts were up by 4.0% on the year in the first four months of 2018. Broken down by category, revenue from joint taxes was up by 4.2%, receipts from federal taxes were up by 2.0%, and the yield from Länder taxes was up by 9.2%.

Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants to the Länder) were up by 3.3% on the year in April 2018. Länder tax receipts recorded a marked year-on-year gain of 4.7%, driven by strong yields from the taxes that accrue exclusively to the Länder. Local authorities’ share of revenue from joint taxes was up by 7.9% on the year.

Joint taxes

Wages tax

Revenue from wages tax again recorded strong growth in April 2018, with gross receipts posting a 5.0% 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 0.4%, but this figure was significantly distorted by a change in the underlying statistical data. Absent this effect, child benefit payments would have posted an increase of about 3%, and the increase in gross wages tax receipts would have amounted to roughly 5.6%. Nevertheless, this effect did not have an impact on cash receipts, which were up by 6.1% on the year in April. In cumulative terms, cash receipts from wages tax were up by 6.1% on the year in the first four months of 2018.

Corporation tax

Gross receipts from corporation tax fell by 26.4% to €0.4bn in April, traditionally a low-revenue month for this tax. There was a sharp increase in retroactive prepayments resulting from corporation tax assessments, but this failed to offset a drop in the balance between back-payments and refunds. After subtracting investment allowances, cash receipts from corporation tax were down by 25.0% on the year in April 2018. Taken cumulatively, cash receipts from corporation tax were up by 8.5% on the year in the first four months of 2018.

Assessed income tax

Gross revenue from assessed income tax posted a strong year-on-year gain of 10.7% in April, a month when revenue from this tax tends to be low. As was the case with corporation tax, retroactive prepayments were up sharply. At the same time, the balance between back-payments and refunds (excluding employee refunds) remained constant on the year. Employee refunds increased by 10.0% on the year in April; after these are subtracted from the gross figure (along with investment allowance payments and owner-occupied homes premiums, which are insignificant in terms of amount), net cash receipts from income tax were up by 11.5% on the year in April 2018. In cumulative terms, cash receipts from assessed income tax were up by 4.3% on the year in the first four months of 2018.

Non-assessed taxes on earnings

Gross receipts from non-assessed taxes on earnings were up sharply on the year in April, by 15.7%. Combined with the decline 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 up by 26.4% in April 2018. Revenue from these taxes shows a high level of volatility over the course of the year, depending on how companies – major corporations in particular – schedule their dividend payments. Cumulative cash receipts from non-assessed taxes on earnings were up by 4.1% on the year in the first four months of 2018.

Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains was down by 6.3% on the year in April 2018. This was probably due to a year-on-year decline in tax revenue from capital gains. Taken cumulatively, cash receipts from final withholding tax on interest and capital gains were up by 16.5% on the year in the four months from January to April 2018.

Value added taxes

The yield from value added taxes posted a moderate gain of 1.8% on the year in April. Domestic VAT revenue remained basically unchanged on the year, with a slight plus of 0.1%, while import VAT receipts fell by 6.5%. Cumulative cash receipts from value added taxes were up by 1.9% on the year in the first four months of 2018.

Taxes accruing to the Federation

Receipts from taxes accruing solely to the Federation were up by 3.2% on the year in April 2018. Taxes posting revenue growth included energy duty (up 13.7%), solidarity surcharge (up 5.3%) and insurance tax (up 4.9%). Tobacco duty revenue was down sharply on the year in April, by 21.1%. 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 was up by 41.1% on the year in April 2018. The yield from inheritance tax was up by 97.1% over the same month last year, due to a one-off effect. In addition, receipts from real property transfer tax recorded a gain of 21.1%, with strong revenue growth in nearly all of the Länder. Other taxes posting revenue increases included betting and lottery tax (up 2.8%) and fire protection tax (up 3.3%). In contrast, beer duty revenue was down by 6.8% on the year in April.