• Federal budget trends up to and including November 2018
• Trends in federal expenditure by function
• Trends in federal expenditure by economic category
• Trends in federal revenue
• Tax revenue in November 2018
• Borrowing and guarantees
• Calendar

Federal budget trends up to and including November 2018

Revenue

Federal revenue for the January–November 2018 period totalled €300.6bn, up by 6.5% (€18.4bn) on the year. Tax revenue (including EU own resources) increased by 5.5% (€14.4bn). Tax revenue trends this year have been affected by various special factors. In 2017, approximately €7.3bn of nuclear fuel duty (including interest) had to be returned to energy supply companies following the Federal Constitutional Court’s ruling of 7 June 2017. In addition, transfers of GNI-based own resources to the EU have been up significantly in 2018, by approximately €5.8bn on the year.

Other revenue was 21.4% (€4bn) higher on the year in the January–November 2018 period, mainly due to an increase in allocations from the Bundesbank’s profits (allocations so far this year have totalled €1.9bn, an increase of €1.5bn on the year). In addition, revenue from the distance-based commercial vehicle toll increased by €0.5bn and profits from the Federation’s holdings were up by €0.3bn on the year.

Expenditure

Cumulative federal expenditure for the period from January to November 2018 totalled €304.4bn, an increase of 2.1% (€6.2bn) on the year. Federal spending is separated into consumption and investment expenditure. In the January–November 2018 period, consumption spending was 2.3% higher than in the same period last year. This can be attributed primarily to increases in military procurement spending (up by +10.1%) and in ongoing grants to public administrations (up by +18.1%). In the latter category, the Federation’s allocation of €2.8bn to the Energy and Climate Fund had the biggest impact on results. This category also includes an increase in federal grants to reimburse the Länder for social spending on basic income support for older people and for people with reduced earning capacity. These grants 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–November 2018 period, tempering the increase in consumption expenditure. Nevertheless, there was a marked +2.7% increase in social security spending during this period, mainly as a result of higher allocations to the general pension insurance system (up by +3.3%). Interest expenditure fell sharply on the year by 6.6% in the first eleven months of 2018. Investment spending totalled €27.2bn; this is approximately 68% of the target level for 2018. The budgeted amount includes a €2.4bn allocation to a special digital infrastructure fund. The Bundestag approved the bill for the fund on 29 November. The final consultation on the bill in the Bundesrat took place on 14 December. If the law enters into force before the end of the year, the funds will be distributed in December. Investment spending remained steady on the year in the January–November 2018 period. Adjusted for the one-off allocation in August 2017 of €1bn to increase the equity of Deutsche Bahn AG, investment increased slightly on the year.

Fiscal balance

The federal budget recorded a deficit of €3.8bn for the period from January to November 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.

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Tax revenue in November 2018

Total tax revenue (excluding local authority taxes) was up by 3.1% in November 2018 over the same month last year. Revenue from joint taxes rose by 3.9%. Revenue from wages tax posted a particularly significant increase. Growth for revenue from VAT was sluggish. Receipts from taxes accruing solely to the Federation fell slightly compared with the same month last year. Receipts from taxes accruing solely to the Länder were up 4.7% on the year.

EU own resources

Transfers of own resources to the EU, including customs duties, stood at approximately €2.5bn in November 2018, up 16.5% over the same month last year. Transfers to the EU are based on the planned financial framework for 2018. Fluctuations over the course of the year depend on the EU’s financing needs at any given time.

Cumulative overview of the January-November 2018 period

In the first eleven months of 2018, total tax receipts (excluding local authority taxes) were up by 6.3% on the year. Broken down by category, revenue from joint taxes was up by 5.6%, receipts from federal taxes were up by 10.4%, and the yield from Länder taxes increased 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 1.0% on the year in November 2018. Länder tax receipts recorded a year-on-year gain of 3.0%. These results were driven by the increased share of revenue from joint taxes allocated to the Federation and the Länder: the Federation’s share increased by 3.2% and the share of the Länder rose by 3.7%. The growth in the Federation’s tax receipts was tempered by a fall in revenue from Federation-only taxes and by higher transfers of EU own resources. The local authorities’ take from joint taxes was up by 10.0% on the year.

Joint taxes

Wages tax

Wages tax revenue again posted strong growth in November 2018, with gross revenue climbing by 6.1% on the year. This reflected continuing employment growth and rising incomes in Germany. Child benefit payments – which are financed from wages tax receipts – fell by 2.3% on the year in November 2018. One Land is experiencing problems with preparing the underlying data for child benefit payments, which continues to skew this figure. However, this effect had no impact on cash receipts. On balance, cash receipts from wages tax increased by 7.8% on the year in November 2018. In cumulative terms, cash receipts from wages tax were up by 6.7% on the year in the first eleven months of the year.

Corporation tax

Corporation tax refunds totalling approximately €0.2bn were paid out in November, generally a low-revenue month for this tax. In November of the previous year, refunds amounted to roughly €0.4bn. This fluctuation is within the usual range of variation that occurs as part of assessment activity. Taken cumulatively, cash receipts from corporation tax were up by 24.0% on the year for the eleven months from January to November 2018.

Assessed income tax

Like corporation tax revenue, receipts from assessed income tax in November were driven mainly by assessment activity and posted weak year-on-year growth. Gross receipts from assessments were up by €0.1bn on the year in November 2018. However, employee refunds were also higher on the year, and after these are subtracted from the gross figure, net cash receipts from assessed income tax totalled approximately €0.4bn. In cumulative terms, cash receipts from assessed income tax totalled €44.6bn in the eleven-month period from January to November, an increase of 1.4% on the year.

Non-assessed taxes on earnings

November 2018 saw a 7.9% year-on-year drop in gross receipts from non-assessed taxes on earnings. Combined with the fall 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 5.3% in November 2018. Overall, the trend in revenue from non-assessed taxes on earnings has been very volatile over the course of the year. The cumulative result provides a more solid basis for analysis: here, cash receipts from non-assessed taxes on earnings were up by 12.7% on the year in the January–November period.

Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains fell by 25.1% on the year in November. In the eleven months from January to November 2018, cash receipts from final withholding tax on interest and capital gains were up by 0.9% on the year.

Value added taxes (VAT)

The yield from value added taxes posted a rise of 1.4% on the year in November 2018. Revenue from domestic VAT fell slightly, by 4.2% in year-on-year terms, while import VAT revenue was up by 20.2%. Cumulative cash receipts from value added taxes were up by 3.2% on the year in the eleven-month period from January to November 2018.

Taxes accruing to the Federation

In November 2018, revenue from federal taxes was 1.6% below last year’s level, due to a year-on-year fall in revenue from tobacco duty (-12.7%), energy duty (-4.7%), and alcohol duty (-6.1%). Solidarity surcharge, motor vehicle tax, electricity duty and insurance tax all posted year-on-year revenue gains in November 2018 (up by 7.8%, 6.6%, and 11.9%, respectively). Trends in revenue from other taxes had only a minor impact on the overall results for federal taxes.

Taxes accruing to the Länder

The yield from taxes accruing solely to the Länder was up by 4.7% on the year in November 2018. This outcome was driven mainly by a year-on-year increase in receipts from real property transfer tax (up by 10.1%) and betting and lottery tax (up by 14.3%). Revenue gains were also recorded for fire protection tax (up by 35.8%) and beer duty (up by 16.2%). Receipts from inheritance tax were down 11.9% on the year.

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Borrowing and guarantees

Guarantees

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Calendar

Key dates on the fiscal and economic policy agenda