Federal budget trends up to and including May 2017

Revenue trends

In the first five months of 2017, federal revenue increased by 5.1%, or €6.3bn, compared with the same period last year. This was due to a significant rise in tax revenues, which were up by €10.9bn (+9.9%) on the year. However, any financial impact from the Federal Constitutional Court’s ruling from 7 June 2017 on nuclear fuel duty is not included in the current figures. Other revenue in the January–May period was down by €4.6bn (-34.9%) on the year. The main reason for this was the €2.1bn decline in allocations from the Bundesbank’s profits.

Expenditure trends

Federal expenditure for the period from January to May 2017 totalled €133.4bn, which represents an increase of €5.1bn (+3.9%) over the same period last year.

Federal spending is separated into consumption and investment expenditure. Consumption expenditure was up by 4.4% on the year during this period. Within this category, human resources spending rose by 5.3% and operating expenditure by 7.0%, both above-average increases. Ongoing grants for public administrations also rose in year-on-year terms, mainly due to a significant increase in ongoing grants to the Länder (up by 9.7% on the year). Spending on subsidies for other areas also increased tangibly on the year, particularly in the areas of pensions, social security, and benefits (e.g. unemployment benefit and parental allowance, which were up by 6.6% and 7.4%, respectively). In contrast, interest expenditure was practically unchanged compared with the January–May 2016 period. Investment spending was down by 1.5% (-€140m) during this period, because of lower expenditure on federal financial assistance. This decline was only partially offset by a strong increase in spending on fixed asset investment.

Fiscal balance

In the first five months of 2017, expenditure exceeded revenue by €3.5bn.

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.

to the top

Trends in general government tax revenue

to the top

Tax revenue in May 2017

Total tax revenue (excluding local authority taxes) recorded another year-on-year gain in May 2017, rising by 1.4%. Revenue from joint taxes posted an increase of 2.3% on the year, although individual taxes exhibited divergent trends. While wages tax continued to show strong revenue growth, receipts from assessed income tax and corporation tax declined in year-on-year terms in May (which is a low-yield month for these tax types). The sharp decline in corporation tax revenue in May was the result of a high baseline figure in the previous year and a large amount of refunds. With non-assessed taxes on earnings and value added taxes, the fluctuations in revenue remained within the usual range. Revenue from taxes accruing solely to the Federation were down on the year once again (-3.2%), which can be explained by a baseline effect relating to tobacco duty. Receipts from Länder taxes posted a sharp year-on-year increase of 7.8%.

EU own resources

Payments of own resources to the EU, including customs duties, rose by 6.5% in May 2017 compared with the same month last year. On a cumulative basis, however, own resources payments to the EU fell by 45.2% on the year in the first five months of 2017, due to (a) balances resulting from EU adjustments and amending budgets and (b) the implementation of the EU’s new Own Resources Decision. Overall, it is anticipated that Germany’s transfers of own resources to the EU will be lower this year than in 2016. Payments are subject to fluctuations over the course of the year, depending on the EU’s financing needs at any given time.

Overview of the January–May 2017 period

Total tax receipts increased by 5.6% on the year in the first five months of 2017. Revenue from joint taxes grew by 6.9% in year-on-year terms, while the yield from taxes accruing solely to the Federation was up by 0.3%. Revenue from taxes accruing to the Länder was up by 1.4% on the year in the January–May period.

Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants to the Länder) fell slightly, by 1.6% on the year, in May 2017. The Federation’s share of revenue from joint taxes posted a small increase, but this was outweighed by a decline in receipts from purely federal taxes and the slight rise in transfers of own resources to the EU. In contrast, Länder tax receipts rose by 3.1% compared with the same period last year. This moderate increase was the result of the increase in the share of joint tax revenue accruing to the Länder, together with high revenue from Länder taxes. Local authority revenue from joint taxes was up by 10.4% on the year overall in May 2017.

to the top

Joint taxes

Wages tax

The steady upward trend in wages tax revenue in recent months continued, buoyed by sustained positive employment trends and rising wages. Gross wages tax revenue rose sharply, by 6.0% on the year, in May 2017. Child benefit payments – which are financed from wages tax receipts and subtracted from the gross figure – increased by 1.9% on the year in May. This meant that, on balance, cash receipts from wages tax were up by 7.7% on the year in May. In cumulative terms, cash receipts from wages tax were up markedly, by 6.3% on the year, in the first five months of 2017.

Corporation tax

Gross revenue from corporation tax totalled around €0.3bn in May, which tends to be a low-revenue month for this tax. At approximately €1.1bn, the result for May 2016 had been unusually high. An increase in refunds, together with other factors, led to a lower result in May 2017. This meant that gross revenue from this tax posted a large year-on-year decline of 75.1%, in purely numerical terms. After deducting investment allowance payments, which are continuing to decline in terms of volume, cash receipts from corporation tax stood at approximately €0.3bn for May 2017. A high volume of corporation tax refunds is still expected for 2017 due to high court rulings (Federal Fiscal Court rulings on the STEKO case and section 40 of the Capital Investment Companies Act). The current increase in refunds may indicate that cash receipts in May were impacted to some extent by the anticipated refunds. Cumulative revenue from corporation tax from January to May 2017 was up by 1.2% on the year.

Assessed income tax

In the low-revenue month of May, gross receipts from assessed income tax remained almost at the same level (-0.1%) as in the same period last year. Refunds made to employed persons assessed for income tax increased slightly by 2.2% in May. As a result, cash receipts from assessed income tax fell to approximately €0.3bn in May 2017, a decrease of 11.5% on the year. In cumulative terms, cash receipts from assessed income tax were up by 17.9% on the year in the first five months of 2017.

Non-assessed taxes on earnings

May 2017 saw a year-on-year increase of 4.0% in gross receipts from non-assessed taxes on earnings. Refunds by the Federal Central Tax Office, which are financed from this revenue, were up sharply by approximately €130m. This meant that, on balance, cash receipts from non-assessed taxes on earnings posted a slight fall in May, down by 1.4% on the year. In the first five months of 2017, cumulative cash receipts from non-assessed taxes on earnings were up by 9.4% compared with the same period in 2016.

Final withholding tax on interest and capital gains

Receipts from final withholding tax on interest and capital gains continue to show strong growth, posting a significant year-on-year gain of 36.2% in May 2017. The increase in May may have been the result of growth in revenue from the taxation of capital gains, given that interest rates are still very low. No reliable information can be provided on this question, however, as statistical data on the breakdown of revenue from interest and from capital gains is not available. Taken cumulatively, revenue from final withholding tax on interest and capital gains was up by 23.1% on the year in the first five months of 2017.

Value added taxes

VAT revenue once again posted substantial growth in May 2017, up by 2.9%, following significant increases in previous months. However, it should be noted that VAT revenue displays a high level of volatility over the course of the year. Domestic VAT revenue grew by 0.5% on the year in May, while the yield from import VAT climbed by 11.1%. In cumulative terms, revenue from value added taxes was up sharply by 5.0% on the year in the first five months of 2017.

to the top

Taxes accruing to the Federation

Revenue from taxes accruing solely to the Federation fell by 3.2% on the year in May 2017. Individual taxes showed widely divergent trends, however. Receipts from tobacco duty fell sharply by 32.2% compared with the same month last year. This was due to a very high baseline figure in the previous year, which was the result of a high level of advance production of tobacco products in connection with a change in the law (the introduction of graphic warning images) that became effective on 20 May 2016. In contrast, year-on-year growth was recorded for the high-revenue federal taxes, including energy duty (+6.9%), motor vehicle tax (+0.3%), spirits duty (+1.7%) and insurance tax (+1.9%). Trends in revenue from other taxes had only a minor impact on the overall results for federal taxes. In cumulative terms, receipts from federal taxes were up by 0.3% on the year in the first five months of 2017.

to the top

Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder were up by 7.8% on the year in May 2017. This growth was driven by higher year-on-year receipts from real property transfer tax (+15.8%), fire protection tax (+25.7%), and betting and lottery tax (+3.7%). Receipts from inheritance tax and beer duty were down by 6.2% and 3.4% respectively. Taken cumulatively, receipts from Länder taxes increased slightly, by 1.4% on the year, in the first five months of 2017.

to the top

Credit market funds

to the top

Guarantees

to the top

Key dates on the fiscal policy agenda

Exact statistics and explanations for 1 to 5 above can be found in the German version of the Federal Ministry of Finance’s monthly report.