Federal budget trends up to and including February 2019

Table: Trends in the federal budget

 

Actual 2018

2019 target

Actual1 February 2019

Expenditure (€bn)2

336.7

356.4

64.9

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

 

 

+3.2

Revenue (€bn)3

347.6

350.6

42.6

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

 

 

-12.0

Tax revenue (€bn)

322.4

325.5

39.7

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

 

 

-11.8

Fiscal balance (€bn)

10.9

-5.8

-22.3

Financing/use of surplus:

-10.9

5.8

22.3

Cash resources (€bn)

-

-

81.3

Seigniorage (€bn)

0.3

0.3

-0.1

Movements in reserves4 (€bn)

-11.2

5.5

0.0

Net borrowing5 (€bn)

0.0

0.0

-58.8

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Revenue

Federal revenue for January and February 2019 totalled €42.6bn, down by 12% (€5.8bn) on the year. Tax revenue (including transfers of EU own resources to the EU) declined by 11.8% (€5.3bn), mainly due to the fact that the Federation transferred €4bn more in GNI-based resources to the EU than it did in the first two months of 2018.

Other revenue was 15% (€0.5bn) lower than in the same period last year. This can be attributed primarily to the “other administrative revenue” category, which saw a decline of €0.2bn.

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Expenditure

Federal expenditure in January and February 2019 totalled €64.9bn, up by 3.2% (€2bn) on the year. Federal spending is separated into consumption and investment spending.

Consumption spending was 3.5% higher than in 2018, mainly due to increases in military procurement spending (up by 27.1%). In addition, ongoing grants for public administrations were roughly €800m higher than in the same period last year.

These ongoing grants include federal grants to reimburse the Länder for social spending on basic income support for older people and for people with reduced earning capacity. Last year, roughly half of the corresponding funds for the fourth quarter of 2017 were charged to the 2017 budget, while the other half were charged to the 2018 budget. Starting this year, however, Länder are no longer able to draw down the funds for the final quarter of a year across budget years – from now on, the entirety of these funds must be taken from the following year’s budget. This gives the Federation planning certainty over its four expected transfers to the Länder . The federal grants to reimburse the Länder for social spending on basic income support for older people and for people with reduced earning capacity in January and February of this year thus represent the drawdown for the entire fourth quarter of 2018.

Grants for other areas in January and February 2019 exceeded last year’s figure by roughly 5.5% (€2.1bn). Within this category, grants to companies were up by 16.4% on the year, while grants to social security funds were up by 3.3%. Interest expenditure saw a sharp year-on-year decline of 20.2%.

Investment spending was roughly €4.4bn, only slightly below the level recorded at the end of February 2018.

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Fiscal balance

The federal budget recorded a deficit of €22.3bn for the January–February 2019 period.

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.

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Trends in federal expenditure by function

Trends in federal expenditure by function

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Trends in federal expenditure by economic category

Trends in federal expenditure by economic category

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Trends in federal revenue

Trends in federal revenue

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Tax revenue in February 2019

2019 trends in tax revenue (excluding local authority taxes)1

Total tax revenue (excluding local authority taxes) was 1.6% lower in February 2019 than in the same month last year. Receipts from joint taxes were down by 0.9%, but trends for the individual taxes within this category differed. Revenue from wages tax and value added taxes increased, continuing the trend of previous months. The yield from non-assessed taxes on earnings posted strong year-on-year growth in February, while receipts from assessed income tax and corporation tax declined substantially. February revenue from the latter two tax categories is based on the results of assessments for years prior to 2018, meaning that the decline is a result of coincidental factors to do with the assessment cycle and is unrelated to the signs of economic slowdown that are currently being observed. Receipts from final withholding tax on interest and capital gains continued on a strong downwards path, an effect that was magnified by a high baseline. Revenue from taxes accruing solely to the Federation also recorded a marked year-on-year decline of 7.7%, primarily as a result of a shift in insurance tax and tobacco duty revenue from February to March, which is occurring for technical reasons. Taxes accruing to the Länder once again posted a substantial revenue increase of 13.6%.

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EU own resources

Transfers of own resources to the EU, including customs duties, totalled approximately €6.4bn in February 2019, roughly €2.4bn more than in 2018. Transfers to the EU are based on the planned financial framework for 2019. The overall volume of the 2019 budget is higher than that of the 2018 budget. In addition, fluctuations occur over the course of the year based on the EU’s financing needs at any given time. February’s high transfers were primarily a result of expenditure on the European Agricultural Guarantee Fund (EAGF).

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Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants to the Länder ) were down by 14.2% on the year in February 2019. This can be attributed to various factors. First, receipts from joint taxes as well as from taxes accruing solely to the Federation were down in February 2019. Second, the Federation’s share of value added taxes is lower than it was in February 2018, mainly as a result of changes in the distribution of VAT revenue in the fiscal equalisation system on the basis of legislation adopted in late 2018 to extend federal support for the Länder and local authorities to help them pay for refugee-related costs and adjust revenue distribution arrangements between the Federation and Länder following the financial closure of the German Unity Fund ( Gesetz zur fortgesetzten Beteiligung des Bundes an den Integrationskosten der Länder und Kommunen und zur Regelung der Folgen der Abfinanzierung des Fonds „Deutsche Einheit “). In addition, the Federation’s transfers of own resources to the EU were higher than in 2018. The Länder saw a 1.0% rise in tax revenue. Their tax receipts were boosted by the change in VAT revenue distribution mentioned above and by dynamic growth in revenue from taxes accruing to the Länder , which compensated for the decline in receipts from joint taxes. The local authorities’ take from joint taxes was down by 0.5% on the year.

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Cumulative overview of the January–February 2019 period

Total tax receipts increased by 0.2% on the year in the January-February 2019 period. Revenue from joint taxes rose by 0.6% in year-on-year terms, while the yield from taxes accruing to the Länder was up by 12.8%. Receipts from taxes accruing solely to the Federation were 5.2% below last year’s level.

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Joint taxes

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Wages tax

Growth in wages tax revenue continued to be very strong in February 2019, with gross receipts increasing by 5.4% on the year. This reflected continuing employment growth and rising incomes in Germany. Child benefit payments – which are financed from wages tax receipts – increased by 3.2% on the year in February 2019. However, it should be noted here that the 2018 baseline was understated as a result of statistical problems. Payments of old-age pension allowance, which is also financed from wages tax revenue, declined from €130m in February 2018 to €89m in February 2019. On balance, cash receipts from wages tax increased by 5.6% on the year in February 2019 and by 6.1% on the year in cumulative terms over the first two months of 2019.

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Corporation tax

February is a month when corporation tax revenue tends to be low. Negative receipts of -€32m were recorded for this tax in February 2019. In February last year, corporation tax receipts totalled €486m. Investment allowance payments are deducted from the gross receipts, although their impact is only marginal at this point. The resulting cash receipts from corporation tax stood at approximately -€33m in February 2019. On a cumulative basis, cash receipts from corporation tax fell by 76.6% on the year in January–February 2019.

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Assessed income tax

February is a month when revenue from assessed income tax tends to be low. In February 2019, gross receipts from this tax were down by 37.7% on the year and stood at roughly €1.2bn. Once employee refunds, which were up this year, are subtracted from the gross figure, net cash receipts totalled €0.4bn, a year-on-year decline of 65.7%. In cumulative terms, cash receipts from assessed income tax were down by 31.4% on the year in the January–February 2019 period.

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Non-assessed taxes on earnings

February 2019 saw a 20.1% year-on-year rise in gross receipts from non-assessed taxes on earnings. Taking into account a 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 31.2%. Overall, the trend in revenue from non-assessed taxes on earnings tends to be very volatile over the course of the year. On a cumulative basis, cash receipts from this tax increased by 36.6% on the year in January–February 2019.

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Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains fell by 63.0% on the year in February. This was partly due to an exceptionally high baseline figure from February 2018. In cumulative terms, cash receipts from withholding tax on interest and capital gains were down by 54.7% on the year in the January–February 2019 period.

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Value added taxes (VAT)

Following a relatively poor result in January, revenue from value added taxes posted a marked increase of 3.3% on the year in February 2019. Receipts from domestic VAT rose by 2.5%, while import VAT revenue increased by 6.3%. The take from VAT tends to be very volatile over the course of any given year. Cumulative cash receipts from value added taxes were up by 2.3% on the year in the January–February 2019 period.

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Taxes accruing to the Federation

In February 2019, revenue from taxes accruing solely to the Federation was 7.7% below last year’s level, with particularly marked declines in revenue from insurance tax (down by 9.5%) and tobacco duty (down by 14.9%). For technical reasons, a large amount (roughly €0.9bn) that should be recorded as February revenue will actually be posted in March’s results for these taxes. This means that the cash receipts are not apparent at this stage. Declines in revenue were also recorded for energy duty (down by 8.5%) and electricity duty (down by 2.7%). Solidarity surcharge brought in 5.0% less, reflecting the trend of its tax bases. Revenue gains were recorded for motor vehicle tax (up by 3.7%). Trends in revenue from other taxes had only a minor impact on the overall results for taxes accruing to the Federation.

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Taxes accruing to the Länder

The yield from taxes accruing solely to the Länder was up by 13.6% on the year in February 2019. This was driven mainly by higher receipts from real property transfer tax (up by 12.8 %) and inheritance tax (up by 22.8 %). Revenue gains were also recorded for fire protection tax (up by 3.4%) and betting and lottery tax (up by 0.5%). Receipts from beer duty were down by 8.9% on the year.

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Borrowing and guarantees

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

 

Authorised

amount

Amount allocated

as of 31 December 2018

Amount allocated

as of 31 December 2017

in €bn

Export credit guarantees

153.0

120.7

121.0

Loans to foreign debtors, foreign direct investment, EIB loans

65.0

42.7

44.3

Financial cooperation projects

28.5

22.8

19.6

Food stockpiling

0.7

0.0

0.0

Domestic guarantees

158.0

104.7

103.1

International financial institutions

66.0

60.1

60.1

Treuhandanstalt successor organisations

1.0

1.0

1.0

Interest compensation guarantees

15.0

15.0

15.0

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Calendar

Publication schedule
Monthly report Reporting period Publication date

April 2019 issue

March 2019

23 April 2019

May 2019 issue

April 2019

20 May 2019

June 2019 issue

May 2019

20 June 2019

July 2019 issue

June 2019

22 July 2019

August 2019 issue

July 2019

22 August 2019

September 2019 issue

August 2019

20 September 2019

October 2019 issue

September 2019

21 October 2019

November 2019 issue

October 2019

21 November 2019

December 2019 issue

November 2019

20 December 2019

Key dates on the fiscal and economic policy agenda

5–6 April 2019

Eurogroup und informal ECOFIN Council meetings in Bucharest

11–12 April 2019

Meeting of G20 finance ministers and central bank governors in Washington, D.C.

12–14 April 2019

Spring Meetings of the IMF and World Bank in Washington, D.C.

16–17 May 2019

Eurogroup and ECOFIN Council meetings in Brussels

8–9 June 2019

Meeting of G20 finance ministers and central bank governors in Fukuoka, Japan

13–14 June 2019

Eurogroup and ECOFIN Council meetings in Luxembourg

28 June 2019

G20 summit in Osaka, Japan