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20 August 2018

Au­gust 2018 month­ly re­port

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

Federal budget trends up to and including July 2018

Trends in the federal budget

 

Actual 2017

2018 target

Actual1 January–July 2018

Expenditure (€bn)2

325.4

343.6

193.2

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

+0.6

Revenue (€bn)2

330.4

341.7

196.2

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

+6.8

Tax revenue (€bn)

309.4

321.3

181.9

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

+6.6

Fiscal balance (€bn)

5.0

-1.9

3.0

Financing/use of surplus:

-5.0

1.9

-3.0

Cash resources (€bn)

-

-

44.6

Seigniorage (€bn)

0.3

0.3

0.1

Movements in reserves3 (€bn)

-5.3

1.6

0.0

Net borrowing4 (€bn)

0.0

0.0

-47.7

Revenue

Federal revenue for the January–July 2018 period totalled €196.2bn, an increase of 6.8% (€12.5bn) on the year. Tax revenue (including EU own resources) increased by 6.6% (€10.5bn). This can be attributed primarily to two baseline effects: The first is the return of approximately €6.3bn worth of nuclear fuel duty to energy supply companies in June 2017, following the Federal Constitutional Court’s ruling of 13 April 2017. The second is the fact that payments of own resources to the EU were much lower in the first months of 2017 than they were in the same period this year, largely due to the effects of the new Own Resources Decision.

Other revenue posted a year-on-year gain of €1.3bn (9.9%) in the January–July 2018 period. This was mainly due to an increase in allocations from the Bundesbank’s profits, with allocations totalling €1.9bn, up by €1.5bn over the same period last year.

Trends in federal revenue

Actual 2017

2018 target

Actual

Year-on-year

change (year to date)

January to July 2017

January to July 2018

in €m

share in %

in €m

share in %

in €m

in %

I. Tax revenue

309,376

93.6

321,307

94.0

170,645

181,905

+6.6

Federal share of joint taxes:

252,630

76.5

263,900

77.2

141,784

149,165

+5.2

Income tax and corporation tax (incl. final withholding tax on interest and capital gains)

136,685

41.4

144,503

42.3

75,684

81,703

+8.0

of which:

 

 

 

 

 

 

 

Wages tax

83,121

25.2

87,741

25.7

45,238

48,230

+6.6

Assessed income tax

25,256

7.6

26,173

7.7

13,449

13,551

+0.8

Non-assessed taxes on earnings

10,451

3.2

10,950

3.2

6,676

8,639

+29.4

Final withholding tax on interest and capital gains

3,227

1.0

3,474

1.0

2,036

2,176

+6.9

Corporation tax

14,629

4.4

16,165

4.7

8,285

9,107

+9.9

Value added taxes (VAT)

114,005

34.5

117,426

34.4

65,258

66,582

+2.0

Trade tax apportionment

1,941

0.6

1,971

0.6

842

879

+4.4

Energy duty

41,022

12.4

41,300

12.1

18,517

18,526

+0.0

Tobacco duty

14,399

4.4

14,160

4.1

7,478

7,467

 -0.1

Solidarity surcharge

17,953

5.4

18,750

5.5

10,266

10,885

+6.0

Insurance tax

13,269

4.0

13,670

4.0

9,196

9,606

+4.5

Electricity duty

6,944

2.1

6,930

2.0

4,061

4,062

+0.0

Motor vehicle tax

8,948

2.7

9,010

2.6

5,628

5,672

+0.8

Nuclear fuel tax

-7,262

-2.2

0

0.0

-6,284

0

X

Alcohol duty

2,096

0.6

2,102

0.6

1,229

1,234

+0.4

Coffee duty

1,057

0.3

1,055

0.3

596

583

 -2.2

Aviation tax

1,121

0.3

1,175

0.3

571

584

+2.3

Deductions

 

 

 

 

 

 

 

Supplementary grants to Länder

9,229

X

8,545

X

4,761

4,245

 -10.8

EU own resources (GNI-based)

14,258

X

22,610

X

7,121

11,041

+55.0

EU own resources (VAT-based)

2,362

X

2,510

X

1,378

1,380

+0.1

Grants to Länder for public transport

8,348

X

8,498

X

4,869

4,957

+1.8

Grants to Länder for motor vehicle tax and HGV toll

8,992

X

8,992

X

4,496

4,496

+0.0

II. Other revenue

21,025

6.4

20,360

6.0

13,007

14,295

+9.9

Revenue from economic activity

3,868

1.2

5,172

1.5

2,826

4,289

+51.8

Interest revenue

344

0.1

309

0.1

192

206

+7.3

Loan repayments, holdings, privatisation proceeds

1,786

0.5

1,939

0.6

886

1,022

+15.3

Total revenue1

330,401

100.0

341,667

100.0

183,652

196,201

+6.8

Expenditure

Cumulative federal expenditure for the period from January to July 2018 totalled €193.2bn, an increase of 0.6% (€1.2bn) on the year. Federal spending is separated into consumption and investment expenditure. In the January–July 2018 period, consumption spending was 0.6% higher than in the same period of 2017. This was primarily a result of increases in military procurement spending (up by 14.2%) and ongoing grants to public administrations (up by 6.0%). Notable expenditure in the latter category includes federal grants to reimburse the Länder for social spending on basic income support for older people and for people with reduced earning capacity. This totalled roughly €900m in the fourth quarter of 2017, but the reimbursements were not paid until 2018. There was no such spending in the first quarter of 2017. Grants for other areas saw a below-average year-on-year rise in the January–July 2018 period, tempering the increase in consumption expenditure. More specifically, there was a significant rise of 2.9% in social security spending during this period, accompanied by declines in grants for pensions and benefits (such as spending on basic income support for jobseekers, which was down by 3.2%) and grants to companies. Interest expenditure fell by 7.1% on the year, also slowing the increase in consumption spending. Investment spending totalled €15.5bn. This figure is skewed slightly downwards by the fact that there have not yet been any actual outflows for the budgeted €2.4bn allocation to a special digital infrastructure fund, as the fund is currently still going through the parliamentary procedure. Investment spending was up by 0.7% on the year in the January–July 2018 period.

Trends in federal expenditure by function

Actual 2017

2018 target

Actual

Year-on-year

change (year to date)

January to July 2017

January to July 2018

in €m

share in %

in €m

share in %

in €m

in %

General public services

77,006

23.7

81,712

 23.8

41,318

41,406

+0.2

Economic cooperation and development

8,330

2.6

9,389

 2.7

3,744

3,494

 -6.7

Defence

36,419

11.2

38,002

 11.1

19,636

20,370

+3.7

Government, central administration

15,858

4.9

17,388

 5.1

9,429

9,892

+4.9

Revenue administration

4,554

1.4

4,891

 1.4

2,589

2,603

+0.5

Education, science, research, cultural affairs

22,984

7.1

24,207

 7.0

11,020

10,895

 -1.1

Support for school and university students and training programme participants

3,603

1.1

3,993

 1.2

2,022

1,961

 -3.0

Science, research and development outside of higher education institutions

12,268

3.8

13,290

 3.9

5,070

5,381

+6.1

Social security, family affairs and youth, labour market policy

168,801

51.9

173,006

 50.4

104,193

107,492

+3.2

Social insurance including unemployment insurance

111,703

34.3

115,063

 33.5

71,663

73,759

+2.9

Labour market policy

37,590

11.6

36,728

 10.7

21,601

21,200

 -1.9

including:

 

 

 

 

 

 

 

Basic income support for jobseekers under Book II of the Social Code

21,423

6.6

20,400

 5.9

12,873

12,458

 -3.2

Government housing and heating allowances under Book II of the Social Code

6,753

2.1

6,900

 2.0

3,777

3,971

+5.2

Family assistance, welfare services, etc.

8,296

2.5

8,946

 2.6

4,862

5,281

+8.6

Social benefits for the consequences of war and political events

1,930

0.6

2,082

 0.6

1,239

1,138

 -8.1

Health, environment, sport, recreation

2,303

0.7

2,856

 0.8

1,073

1,060

 -1.2

Housing, regional planning and local community services

2,923

0.9

3,549

 1.0

1,725

1,673

 -3.0

Housing, home ownership savings premium

2,267

0.7

2,580

 0.8

1,569

1,500

 -4.4

Food, agriculture and forestry

1,068

0.3

1,233

 0.4

345

288

 -16.4

Energy and water supply, trade and services

4,195

1.3

5,481

 1.6

2,692

2,198

 -18.4

Regional support measures

726

0.2

910

 0.3

356

236

 -33.7

Mining, manufacturing and construction

1,532

0.5

1,491

 0.4

1,301

1,151

 -11.5

Transport and communication

21,228

6.5

21,140

 6.2

9,862

10,225

+3.7

Roads

9,484

2.9

10,081

 2.9

4,316

4,817

+11.6

Railways and public transport

7,047

2.2

6,162

 1.8

2,867

2,967

+3.5

Financial management

30,532

9.4

30,416

 8.9

20,012

18,203

 -9.0

Interest expenditure and borrowing-related expenditure

17,500

5.4

18,107

 5.3

15,373

14,282

 -7.1

Total expenditure 1

325,380

100.0

343,600

 100.0

192,054

193,242

+0.6

Trends in federal expenditure by economic category

Actual 2017

2018 target

Actual

Year-on-year

change (year to date)

January to July 2017

January to July 2018

in €m

share in %

in €m

share in %

in €m

in %

Consumption expenditure

291,367

89.5

304,483

88.6

176,656

177,736

+0.6

Human resources expenditure

31,824

9.8

33,397

9.7

19,211

19,367

+0.8

Salary payments

23,182

7.1

24,796

7.2

13,778

13,928

+1.1

Pensions

8,643

2.7

8,602

2.5

5,432

5,439

+0.1

Operating expenditure

28,693

8.8

30,587

8.9

13,549

14,232

+5.0

Administrative expenditure (excl. human resources)

1,571

0.5

1,588

0.5

796

869

+9.2

Military procurement

10,625

3.3

12,316

3.6

4,330

4,943

+14.2

Other

16,498

5.1

16,682

4.9

8,423

8,421

 -0.0

Interest expenditure

17,497

5.4

18,098

5.3

15,370

14,279

 -7.1

Ongoing grants and subsidies

212,582

65.3

221,491

64.5

127,981

129,327

+1.1

to public administrations

24,814

7.6

28,691

8.4

13,619

14,433

+6.0

to other areas

187,768

57.7

192,800

56.1

114,363

114,894

+0.5

including:

 

 

 

 

 

 

 

Companies

28,527

8.8

30,362

8.8

15,882

15,328

 -3.5

Pensions, assistance, etc.

30,127

9.3

29,391

8.6

18,103

17,830

 -1.5

Social security funds

117,495

36.1

120,190

35.0

74,655

76,804

+2.9

Other asset transfers

770

0.2

910

0.3

546

531

 -2.7

Investment expenditure

34,013

10.5

39,803

11.6

15,397

15,506

+0.7

Financial assistance

24,170

7.4

29,312

8.5

11,316

11,299

 -0.2

Grants and subsidies

21,421

6.6

27,131

7.9

10,452

10,745

+2.8

Loans, guarantees

1,221

0.4

1,618

0.5

649

441

 -32.0

Acquisition of holdings; capital contributions

1,528

0.5

564

0.2

215

113

 -47.4

Fixed asset investment

9,843

3.0

10,490

3.1

4,081

4,207

+3.1

Construction projects

7,631

2.3

7,742

2.3

3,086

3,305

+7.1

Acquisition of movable assets

1,713

0.5

1,954

0.6

733

647

 -11.7

Acquisition of real property

499

0.2

794

0.2

262

255

 -2.7

General reduction/increase in expenditure

0

0.0

-686

-0.2

0

0

X

Total expenditure1

325,380

100.0

343,600

100.0

192,054

193,242

+0.6

Fiscal balance

The federal budget recorded a surplus of €3bn for the period from January to July 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.

Trends in general government tax revenue

2018 trends in tax revenue (excluding local authority taxes)

2018

July

Year-on-year
change 

January

to July

Year-on-year

change  

2018 estimates4

Year-on-year
change

in €m

in %

in €m

in %

in €m

in %

Joint taxes            
Wages tax2

18,240

+7.9

117,694

+6.5

206,450

+5.6

Assessed income tax

-644

X

31,885

+0.8

61,650

+3.7

Non-assessed taxes on earnings

4,495

+6.6

17,338

+29.0

21,900

+4.7

Final withholding tax on interest and capital gains

(including the former withholding tax on interest income)

456

 -5.8

4,945

+6.4

7,895

+7.7

Corporation tax

-506

X

18,214

+9.9

32,330

+10.5

Value added taxes (VAT)

19,320

+2.1

134,369

+2.8

235,000

+3.8

Trade tax apportionment

1,034

+10.4

2,429

+4.8

4,758

+1.6

Increased trade tax apportionment

986

+5.2

2,098

+2.1

3,899

+0.1

Total joint taxes

43,382

+2.3

328,972

+5.5

573,882

+4.8

Taxes accruing to the Federation
Energy duty

3,504

 -3.0

18,526

+0.1

41,300

+0.7

Tobacco duty

1,558

+29.1

7,467

 -0.1

14,160

-1.7

Alcohol duty (formerly spirits duty)

176

+1.2

1,233

+0.4

2,100

+0.3

Insurance tax

776

+16.6

9,606

+4.5

13,670

+3.0

Electricity duty

532

+0.1

4,062

+0.0

6,930

-0.2

Motor vehicle tax

709

 -1.2

5,672

+0.8

9,010

+0.7

Aviation tax

102

 -0.3

584

+2.4

1,175

+4.9

Nuclear fuel duty

0

X

0

X

0

X

Solidarity surcharge

1,171

+3.3

10,885

+6.0

18,750

+4.4

Other taxes accruing to the Federation

107

 -1.4

824

 -0.2

1,467

+1.5

Total taxes accruing to the Federation

8,634

+4.6

58,860

+14.3

108,562

+8.6

Taxes accruing to the Länder
Inheritance tax

487

+10.5

4,085

+12.8

6,020

-1.5

Real property transfer tax

1,197

+10.0

8,043

+6.1

13,900

+5.8

Betting and lottery tax

169

+24.8

1,118

+1.6

1,851

+0.8

Beer duty

65

 -4.4

382

 -0.9

665

+0.1

Other taxes accruing to the Länder

24

 -2.8

320

+1.6

465

+3.1

Total taxes accruing to the Länder

1,942

+10.5

13,948

+7.3

22,901

+3.1

EU own resources
Customs duties

401

 -5.5

2,791

 -4.7

5,200

+2.7

VAT-based own resources

181

 -8.1

1,380

+0.2

2,510

+6.3

GNI-based own resources

1,694

+0.0

11,041

+55.1

22,610

+58.6

Total EU own resources

2,276

 -1.7

15,212

+33.1

30,320

+39.8

Federation3

23,475

+2.9

182,305

+6.6

321,336

+3.9

Länder 3

25,290

+2.6

179,689

+4.8

310,276

+4.0

EU

2,276

 -1.7

15,212

+33.1

30,320

+39.8

Local authorities’ share of income and value added tax

3,317

+7.9

27,366

+7.8

48,613

+7.7

Total tax revenue (excluding local authority taxes)

54,358

+2.9

404,571

+6.7

710,545

+5.3

Tax revenue in July 2018

Total tax revenue (excluding local authority taxes) was up by 2.9% in July 2018 over the same month last year. Revenue from joint taxes climbed by 2.3%. In particular, revenue from wages tax and from non-assessed taxes on earnings posted sharp year-on-year increases once more. Receipts from final withholding tax on interest and capital gains declined on the year. Revenue from taxes accruing solely to the Federation was up by 4.6% in year-on-year terms, while revenue from taxes accruing to the Länder was up by 10.5% on the year.

EU own resources

Transfers of own resources to the EU, including customs duties, fell by 1.7% on the year in July 2018, to roughly €2.3bn. 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–July 2018 period

Total tax receipts increased by 6.7% on the year in the first seven months of 2018. Broken down by category, revenue from joint taxes was up by 5.5%, receipts from federal taxes increased by 14.3%, and the yield from Länder taxes rose by 7.3%.

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 2.9% on the year in July 2018. Länder tax receipts recorded a year-on-year gain of 2.6%. Both the Federation and the Länder benefited from the good results from their respective taxes. In July 2018, the Federation also paid €800m in consolidation assistance to the Länder of Berlin, Bremen, Saarland, Saxony-Anhalt and Schleswig-Holstein. The local authorities’ take from joint taxes was up by 7.9% on the year.

Joint taxes

Wages tax

Wages tax receipts again recorded strong growth in July 2018, with gross revenue from this tax increasing by 6.5% on the year. This reflected continuing employment growth and rising incomes in Germany. Child benefit payments – which are financed from receipts from wages tax – rose by 0.4% on the year in July 2018. One Land is experiencing problems with preparing the underlying data for child benefit payments, which continues to skew this figure. After adjusting for this, there was an increase of approximately 3% in child benefit payments, which puts the rise in gross wages tax receipts at roughly 7%. However, this effect had no impact on cash receipts. On balance, cash receipts from wages tax increased by 7.9% in year-on-year terms in July 2018. In cumulative terms, cash receipts from wages tax were up by 6.5% on the year in the January–July 2018 period.

Corporation tax

Around €0.5bn in corporation tax refunds was paid out in July, generally a low-revenue month for this tax. Receipts from corporation tax amounted to approximately €0.2bn in the same month of 2017. Investment allowance payments had only a marginal impact on the outcome. Taken cumulatively, cash receipts from corporation tax were up by 9.9% on the year in the January–July period.

Assessed income tax

Revenue from assessed income tax in July was also mainly generated from assessment activities, with gross receipts falling by around €1.0bn on the year. Employee refunds also posted a rise (of 11.8%). After subtracting these (along with investment allowance payments and owner-occupied homes premiums, which are negligible in terms of amount), net refunds of assessed income tax amounted to approximately €0.6bn in July 2018. In cumulative terms, cash receipts from assessed income tax were up by 0.8% on the year in the first seven months of 2018.

Non-assessed taxes on earnings

July 2018 saw a 5.5% year-on-year increase in gross receipts from non-assessed taxes on earnings. 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 6.6% in July. Hence the trend in revenue from this tax remained dynamic in July despite strong growth in previous months and a high 2017 baseline. Cumulative cash receipts from non-assessed taxes on earnings were up by 29.0% on the year in the January–July period.

Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains fell by 5.8% on the year in July 2018. This is likely to be primarily 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 6.4% on the year in January–July 2018.

Value added taxes (VAT)

Revenue from value added taxes posted moderate year-on-year growth of 2.1% in July 2018, despite a relatively high July 2017 baseline figure. Revenue from domestic VAT fell slightly, by 1.2% in year-on-year terms, while import VAT receipts rose by 12.7% on the year. Cumulative cash receipts from value added taxes were up by 2.8% on the year in January–July 2018.

Taxes accruing to the Federation

Receipts from taxes accruing solely to the Federation were up by 4.6% on the year in July 2018. However, this figure was slightly inflated due to two special factors. Firstly, revenue from tobacco duty was up by 29.1% in July, partly due to the fact that some of the June receipts were only recorded in July. Secondly, the strong growth in revenue from insurance tax (+16.6%) was the result of tax revenue from previous years being recorded. Solidarity surcharge also posted revenue growth (+3.3%). Electricity duty and motor vehicle tax were down on the year in July (by 3.0% and 1.2%, 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 was up by 10.5% on the year in July 2018. This was driven by a significant increase in revenue from real property transfer tax (+10.0%) and by a rise in inheritance tax receipts (+10.5%). The latter had a relatively weak July 2017 baseline, however. Receipts from betting and lottery tax also posted a significantly better result in July 2018, rising by 24.8% on the year. Yields from beer duty and fire protection tax were down in year-on-year terms, by 4.4% and 2.8% respectively.

Borrowing and guarantees

Debt trends for the Federation and its special funds (in €m)

Debt level

Borrowing
(increase)

Debt repayment
(decrease)

Debt level 

Change in debt level
(balance)

30 June 2018

July 2018

July 2018

31 July 2018

July 2018

Budget borrowing

1,080,716

15,877

-21,672

1,074,920

-5,796

broken down by purpose

Federal budget

1,039,312

15,856

-21,672

1,033,496

-5,816

Financial Market Stabilisation Fund

22,467

-1

-

22,466

-1

Investment and Redemption Fund

18,936

22

-

18,958

22

broken down by debt type

Federal securities

1,067,459

15,877

-21,036

1,062,300

-5,160

Federal bonds

710,379

4,780

-21,000

694,160

-16,220

30-year federal bonds

212,347

1,227

-

213,574

1,227

10-year federal bonds

498,033

3,553

-21,000

480,586

-17,447

Inflation-linked federal securities

62,863

691

-

63,554

691

30-year inflation-linked federal bonds

7,292

212

-

7,504

212

10-year inflation-linked federal bonds

55,571

479

-

56,051

479

Federal notes

185,042

3,584

-

188,626

3,584

Federal Treasury notes

92,639

3,114

-

95,753

3,114

Treasury discount papers issued by the Federation

15,049

3,707

-

18,755

3,707

Other federal securities

1,487

0

-36

1,451

-36

Securitised loans

8,781

-

-636

8,145

-636

Other loans and ordinary debts

4,475

-

-

4,475

-

broken down by maturity

up to one year

153,720

 

 

159,439

5,718

one to four years

319,993

 

 

323,566

3,574

over four years

607,003

 

 

591,915

-15,088

Additional information1

Liabilities from the capital indexing of inflation-linked federal securities

4,276

 

 

4,648

372

Reserves in accordance with the Final Payment Financing Act (Schlusszahlungsfinanzierungsgesetz)

3,464

 

 

3,484

21

Guarantees

  

Authorised

amount

Amount allocated

as of 30 June 2018

Amount allocated

as of 30 June 2017

in €bn

Export credit guarantees

160.0

118.5

124.5

Loans to foreign debtors, foreign direct investment, EIB loans

65.0

43.0

44.0

Financial cooperation projects

28.5

20.7

17.9

Food stockpiling

0.7

0.0

0.0

Domestic guarantees

158.0

100.8

102.5

International financial institutions

66.0

60.1

60.0

Treuhandanstalt successor organisations

1.0

1.0

1.0

Interest compensation guarantees

8.0

15.0

15.0

Calendar

Publication schedule1 of the monthly reports

Monthly report Reporting period Publication date
September 2018 issue

August 2018 

20 September 2018

October 2018 issue

September 2018 

22 October 2018

November 2018 issue

October 2018

22 November 2018 

December 2018 issue

November 2018 

20 December 2018

Key dates on the fiscal and economic policy agenda

7–8 September 2018 Eurogroup and informal ECOFIN meetings in Vienna
1–2 October 2018 Eurogroup and ECOFIN Council meetings in Luxembourg
11 October 2018 Meeting of G20 finance ministers and central bank governors in Bali
12–13 October 2018 Annual meetings of the IMF and World Bank in Bali
5–6 November 2018 Eurogroup and ECOFIN Council meetings in Brussels