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21 June 2018

June 2018 month­ly re­port

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

Federal budget trends up to and including May 2018

Trends in the federal budget

 

Actual 2017

Actual1 as of May 2018

Expenditure (€bn)2

325.4

136.1

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

+2.0

Revenue (€bn)2

330.4

133.2

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

+2.5

Tax revenue (€bn)

309.4

122.2

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

+0.7

Fiscal balance (€bn)

5.0

-2.9

Financing/use of surplus:

-5.0

2.9

Cash resources (€bn)

-

43.8

Seigniorage (€bn)

0.3

0.1

Reserve funds balance (€bn)

5.3

0.0

Net borrowing/current financial market balance3 (€bn)

0.0

-40.9

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

Federal revenue in the first five months of 2018 amounted to €133.2bn, up by €3.3bn (2.5%) on the year. Tax revenue (including EU own resources) was up only slightly, by 0.7%. This was mainly due to a baseline effect involving GNI-based own resources – payments of own resources were much lower on the year in the first quarter of 2017 largely as a result of the effects of the new Own Resources Decision.

Other revenue posted a year-on-year gain of €2.4bn (27.8%) in the first five months of 2018. This was primarily 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. In addition, profits from the Federation’s holdings were nearly €500m higher than in the same period of 2017.

Trends in federal revenue

Actual

2017

Actual

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

January to May 2017

January to May 2018

€m

Share
in %

€m

I. Tax revenue

309,376

93.6

121,299

122,160

+0.7

Federal share of joint taxes:

252,630

76.5

96,563

100,985

+4.6

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

136,685

41.4

48,528

52,198

+7.6

of which:

Wages tax

83,121

25.2

30,682

32,753

+6.7

Assessed income tax

25,256

7.6

7,942

8,239

+3.7

Non-assessed taxes on earnings

10,451

3.2

3,638

4,061

+11.6

Final withholding tax on interest and capital gains

3,227

1.0

1,627

1,803

+10.8

Corporation tax

14,629

4.4

4,639

5,342

+15.2

Value added taxes (VAT)

114,005

34.5

47,461

48,210

+1.6

Trade tax apportionment

1,941

0.6

574

577

+0.5

Energy duty

41,022

12.4

11,388

11,414

+0.2

Tobacco duty

14,399

4.4

5,001

4,855

 -2.9

Solidarity surcharge

17,953

5.4

6,687

7,139

+6.8

Insurance tax

13,269

4.0

7,873

8,156

+3.6

Electricity duty

6,944

2.1

2,843

2,856

+0.5

Motor vehicle tax

8,948

2.7

4,067

4,143

+1.9

Nuclear fuel tax

-7,262

-2.2

0

0

X

Spirits duties

2,096

0.6

900

916

+1.8

Coffee duty

1,057

0.3

428

420

 -1.9

Aviation tax

1,121

0.3

374

382

+2.1

Supplementary grants to Länder

-9,229

-2.8

-2,271

-2,026

+10.8

EU GNI own resources

-14,258

-4.3

-3,767

-8,186

 -117.3

EU VAT own resources

-2,362

-0.7

-984

-1,045

 -6.2

Grants to Länder for public transport

-8,348

-2.5

-3,478

-3,541

 -1.8

Grants to Länder for motor vehicle tax and HGV toll

-8,992

-2.7

-4,496

-4,496

+0.0

II. Other revenue

21,025

6.4

8,607

11,001

+27.8

Revenue from economic activity

3,868

1.2

1,949

4,266

+118.9

Interest revenue

344

0.1

86

113

+31.4

Loan repayments, holdings, privatisation revenue

1,786

0.5

364

444

+22.0

Total revenue1

330,401

100.0

129,906

133,160

+2.5

Expenditure

Cumulative federal expenditure for the five-month period from January to May 2018 totalled €136.1bn, a rise of 2.0% (€2.7bn) over the same period last year. Federal spending is separated into consumption and investment expenditure. In the first five months of 2018, consumption spending was 1.7% higher than in January to May 2017. This can be attributed primarily to increases in human resources expenditure (up by 5.6%), military procurement (up by 10.7%) and ongoing grants to public administrations (up by 9.4%). The 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 saw a below-average year-on-year rise in the January–May 2018 period, tempering the increase in consumption expenditure. More specifically, there was a significant rise of 2.8% in social security spending during this period, accompanied by declines in grants for pensions and benefits (such as basic income support for jobseekers, ‑2.8%) and grants to companies. Interest expenditure fell by 2.7% on the year, also slowing the increase in consumption spending. In contrast, investment spending was up sharply by 5.8% on the year in the first five months of 2018. This development was mainly driven by higher spending on financial assistance, particularly (a) grants to a special fund for investing in the expansion of childcare and (b) grants to other areas. Fixed asset investment was up markedly on the year in January to May 2018. One significant factor here was the increase in construction spending.

Trends in federal expenditure by function

Actual

2017

Actual

Year‑on‑year

change in %
(year to date)

January to May 2017

January to May 2018

m

Share

in %

€m

General public services

77,006

 23.7

29,203

29,943

+2.5

Economic cooperation and development

8,330

 2.6

2,683

2,385

 -11.1

Defence

36,419

 11.2

14,085

14,442

+2.5

Government, central administration

15,858

 4.9

6,935

7,445

+7.3

Revenue administration

4,554

 1.4

1,834

2,039

+11.2

Education, science, research, cultural affairs

22,984

 7.1

7,175

6,878

 -4.1

Support for school and university students and training programme participants

3,603

 1.1

1,557

1,472

 -5.4

Science, research and development outside of higher education institutions

12,268

 3.8

3,010

3,140

+4.3

Social security, family and youth affairs, labour market policy

168,801

 51.9

75,826

78,497

+3.5

Social insurance including unemployment insurance

111,703

 34.3

53,060

54,601

+2.9

Labour market policy

37,590

 11.6

15,353

15,163

 -1.2

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

21,423

 6.6

9,279

9,015

 -2.8

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

6,753

 2.1

2,593

2,843

+9.7

Family assistance, welfare services, etc.

8,296

 2.5

3,480

3,769

+8.3

Social benefits for the consequences of war and political events

1,930

 0.6

908

833

 -8.3

Health, environment, sport, recreation

2,303

 0.7

770

763

 -0.9

Housing, regional planning and local community services

2,923

 0.9

1,184

1,140

 -3.7

Housing, home ownership savings premium

2,267

 0.7

1,070

1,012

 -5.4

Food, agriculture and forestry

1,068

 0.3

225

201

 -10.8

Energy and water supply, trade and services

4,195

 1.3

1,873

1,859

 -0.7

Regional support measures

726

 0.2

117

134

+14.4

Mining, manufacturing and construction

1,532

 0.5

1,167

1,147

 -1.7

Transport and communication

21,228

 6.5

6,096

6,439

+5.6

Roads

9,484

 2.9

2,531

2,820

+11.4

Railways and public transport

7,047

 2.2

1,722

1,933

+12.3

Financial management

30,532

 9.4

11,212

10,532

 -6.1

Interest expenditure

17,500

 5.4

7,724

7,517

 -2.7

Total expenditure1

325,380

 100.0

133,429

136,111

+2.0

Trends in federal expenditure by economic category

Actual

2017

Actual

Year‑on‑year

change in %
(year to date)

January to

May 2017

January to

May 2018

€m

Share
in %

€m

Consumption expenditure

291,367

89.5

124,139

126,285

+1.7

Personnel expenditure

31,824

9.8

13,815

14,594

+5.6

Salary payments

23,182

7.1

9,904

10,510

+6.1

Pensions

8,643

2.7

3,911

4,084

+4.4

Current material expenditure

28,693

8.8

9,505

9,735

+2.4

Non-personnel expenditure

1,571

0.5

569

610

+7.2

Military procurement

10,625

3.3

2,928

3,241

+10.7

Other

16,498

5.1

6,008

5,883

 -2.1

Interest expenditure

17,497

5.4

7,722

7,515

 -2.7

Current grants and subsidies

212,582

65.3

92,669

94,034

+1.5

to public administration

24,814

7.6

9,524

10,416

+9.4

to other sectors

187,768

57.7

83,145

83,618

+0.6

including:

Private enterprises

28,527

8.8

11,152

10,551

 -5.4

Pensions, assistance etc.

30,127

9.3

13,059

12,877

 -1.4

Social insurance funds

117,495

36.1

55,192

56,720

+2.8

Other asset transfers

770

0.2

429

408

 -4.9

Investment expenditure

34,013

10.5

9,290

9,826

+5.8

Financial assistance

24,170

7.4

6,996

7,459

+6.6

Grants and subsidies

21,421

6.6

6,583

7,047

+7.0

Loans, guarantees

1,221

0.4

301

299

 -0.7

Acquisition of holdings; capital contributions

1,528

0.5

113

113

+0.0

Fixed asset investment

9,843

3.0

2,294

2,367

+3.2

Construction measures

7,631

2.3

1,683

1,758

+4.5

Acquisition of movable assets

1,713

0.5

477

431

 -9.6

Acquisition of real property

499

0.2

134

178

+32.8

General reduction/increase in expenditure

0

0.0

0

0

X

Total expenditure1

325,380

100.0

133,429

136,111

+2.0

Fiscal balance

The federal budget recorded a deficit of €2.9bn for the five-month period from January to May 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. 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

May

Year‑on‑year
change

January to

May

Year‑on‑year
change

2018 estimates4

Year‑on‑year
change

in €m

in %

in €m

in %

in €m

in %

Joint taxes

           

Wages tax2

16,047

+8.5

81,242

+6.6

206,450

+5.6

Assessed income tax

198

 -32.2

19,386

+3.7

61,650

+3.7

Non-assessed taxes on earnings

2,994

+29.7

8,120

+12.3

21,900

+4.7

Final withholding tax on interest and capital gains

388

 -24.3

4,098

+10.8

7,895

+7.7

Corporation tax

853

+204.7

10,685

+14.4

32,330

+10.5

Value added taxes (VAT)

19,903

+4.4

96,149

+2.4

235,000

+3.8

Trade tax apportionment

294

+33.8

1,393

+0.6

4,758

+1.6

Increased trade tax apportionment

123

+66.8

1,110

 -0.8

3,899

+0.1

Total joint taxes

40,800

+8.7

222,183

+5.0

573,882

+4.8

Federal taxes

Energy duty

3,145

 -12.2

11,414

+0.2

41,300

+0.7

Tobacco duty

1,470

+28.3

4,855

 -2.9

14,160

 -1.7

Spirits duty incl. alcopops duty

191

+5.0

916

+1.8

2,100

+0.3

Insurance tax

980

+3.8

8,156

+3.6

13,670

+3.0

Electricity duty

540

+4.7

2,856

+0.5

6,930

 -0.2

Motor vehicle tax

799

+3.1

4,143

+1.9

9,010

+0.7

Aviation tax

92

 -3.9

382

+2.4

1,175

+4.9

Nuclear fuel duty

0

X

0

X

0

X

Solidarity surcharge

1,354

+10.4

7,139

+6.8

18,750

+4.4

Other federal taxes

111

 -1.6

607

+1.3

1,467

+1.5

Total federal taxes

8,680

+1.2

40,468

+1.9

108,562

+8.6

Länder taxes

Inheritance tax

522

+10.7

2,946

+12.6

6,020

 -1.5

Real property transfer tax

1,052

 -6.9

5,749

+6.2

13,900

+5.8

Betting and lottery tax

147

 -7.7

789

 -2.3

1,851

+0.8

Beer duty

57

+3.4

249

 -1.4

665

+0.1

Other Länder taxes

30

 -12.7

267

+1.7

465

+3.1

Total Länder taxes

1,808

 -2.3

9,999

+6.9

22,901

+3.1

EU own resources

Customs duty

332

 -13.7

2,007

 -2.5

5,200

+2.7

VAT-based own resources

141

 -28.5

1,045

+6.2

2,510

+6.3

GNI-based own resources

1,308

 -22.8

8,186

+117.3

22,610

+58.6

Total EU own resources

1,780

 -21.8

11,238

+65.0

30,320

+39.8

Federation3

24,153

+9.3

123,225

+0.9

321,336

+3.9

Länder 3

22,562

+6.7

121,506

+4.2

310,276

+4.0

EU

1,780

 -21.8

11,238

+65.0

30,320

+39.8

Local authorities’ share of income tax and value added tax

3,125

+10.2

18,688

+8.6

48,613

+7.7

Total tax revenue (excluding local authority taxes)

51,621

+6.8

274,658

+4.5

710,545

+5.3

Tax revenue in May 2018

Total tax revenue (excluding local authority taxes) was up by 6.8% in May 2018 over the same month last year. This was mainly due to the ongoing rise in receipts from joint taxes, which climbed by 8.7% on the year. Wages tax and non-assessed taxes on earnings recorded particularly strong increases. VAT receipts also rose in May 2018, having posted moderate results or even declines in previous months. In contrast, receipts from final withholding tax on interest and capital gains exhibited a downward trend. Revenue from taxes accruing solely to the Federation was up by 1.2% on the year in May, while the yield from taxes accruing solely to the Länder fell by 2.3%.

EU own resources

Transfers of own resources to the EU, including customs duties, fell by 21.8% on the year in May 2018, to roughly €1.8bn. 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–May 2018 period

Total tax receipts increased by 4.5% on the year in the first five months of 2018. Broken down by category, revenue from joint taxes was up by 5.0%, receipts from federal taxes were up by 1.9%, and the yield from Länder taxes was up by 6.9%.

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 9.3% on the year in May 2018. Länder tax receipts also recorded a marked year-on-year gain (up by 6.7%), driven by strong yields from the share of joint taxes allocated to the Länder. The local authorities’ take from joint taxes was up by 10.2% on the year.

Joint taxes

Wages tax

Wages tax receipts again recorded strong growth in May 2018, with gross revenue from this tax increasing by 5.0% on the year. The figure reflects positive trends in both employment and wages. Child benefit payments – which are financed from wages tax receipts – declined on the year by 2.1%, but this figure was significantly distorted by a change in the underlying statistical data. However, this effect did not have an impact on cash receipts. Payments of old-age pension allowance, which is also financed from wages tax revenue, fell tangibly, by 5.1% on the year. On balance, cash receipts from wages tax increased by 8.5% in year-on-year terms in May 2018. In cumulative terms, cash receipts from wages tax were up by 6.6% on the year in the first five months of 2018.

Corporation tax

Gross receipts from corporation tax increased by €0.6bn in year-on-year terms to €0.9bn in May, traditionally a low-revenue month for this tax. After subtracting investment allowances, cash receipts from corporation tax increased to €0.9bn in May 2018. Taken cumulatively, cash receipts from corporation tax were up by 14.4% on the year in the January–May period.

Assessed income tax

Gross revenue from assessed income tax fell by 6.2% on the year in May, a month when revenue from this tax tends to be low. After subtracting employee refunds, which fell slightly by 1.8% on the year in May, and investment allowance payments and owner-occupied homes premiums, which are insignificant in volume terms, net cash receipts from income tax fell by €0.1bn to €0.2bn in May 2018. In cumulative terms, cash receipts from assessed income tax were up by 3.7% on the year in the first five months of 2018.

Non-assessed taxes on earnings

Gross receipts from non-assessed taxes on earnings were up sharply on the year in May, by 24.2%. 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 rose by 29.7% in May 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 12.3% on the year in the January–May period.

Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains fell by 24.3% on the year in May 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 10.8% on the year in January–May 2018.

Value added taxes

The yield from value added taxes increased significantly in May 2018, by 4.4% on the year. Domestic VAT revenue was up by 3.2% on the year. Receipts from import VAT rose by 8.3% in year-on-year terms in May, following a 6.5% drop in April. Cumulative cash receipts from value added taxes were up by 2.4% on the year in the first five months of 2018.

Taxes accruing to the Federation

Receipts from taxes accruing solely to the Federation were up by 1.2% on the year in May 2018. Solidarity surcharge, insurance tax and electricity duty all posted year-on-year revenue gains in May 2018, increasing by 10.4%, 3.8% and 4.7% respectively. The 28.3% surge in receipts from tobacco duty was due to a temporal shift in revenue from April to May, which occurred for technical reasons. Energy duty revenue was down sharply on the year in May, falling by 12.2%. Here, too, the cause appears to be a technical revenue shift. 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 2.3% on the year in May 2018. A 10.7% increase in inheritance tax receipts failed to make up for a 6.9% drop in yields from real property transfer tax. The remaining Länder taxes exhibited disparate revenue trends. Beer duty was up by 3.4% on the year in May, while betting and lottery tax and fire protection tax both fell in year-on-year terms, by 7.7% and 12.9% respectively.