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22 August 2019

Overview of fed­er­al bud­getary and fi­nan­cial da­ta up to and in­clud­ing Ju­ly 2019

Translated extracts from the Federal Ministry of Finance’s August 2019 monthly report.

Federal budget trends up to and including July 2019

Table: Trends in the federal budget

 

Actual 2018 2019 target Actual1 July 2019

Expenditure (€bn)2

336.7

356.4

200.5

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

 

 

+3.8

Revenue (€bn)3

347.6

350.6

196.8

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

 

 

+0.3

Tax revenue (€bn)

322.4

325.5

179.9

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

 

 

-1.1

Balance of pass-through funds(€bn)

0.0

0.0

0.0

Fiscal balance (€bn)

10.9

-5.8

-3.8

Financing/use of surplus

-10.9

5.8

3.8

Cash resources (€bn)

-

-

65.4

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

-61.8

Revenue

Federal revenue for the period from January to July 2019 totalled approximately €196.8bn, up by 0.3% (roughly €0.6bn) on the year. Tax revenue (including transfers of EU own resources to the EU) declined by 1.1% (about €2bn), mainly due to the fact that the Federation transferred approximately €4.7bn more in GNI-based resources to the EU than it did in the same period last year.

Other revenue was up by 18.2% (roughly €2.6bn) on the year in the January–July period. The year-on-year change can be attributed primarily to an increase in allocations from the profits of the Bundesbank (up by about €0.5bn) and of the Institute for Federal Real Estate (up by about €0.4bn).

Expenditure

Federal expenditure in the first seven months of 2019 totalled €200.5bn, a rise of 3.8% (roughly €7.3bn) over the previous year. Federal spending is separated into consumption and investment spending.

Consumption spending rose by 3.2% (approximately €5.7bn) during this period, with significant year-on-year increases posted for both ongoing grants to public administrations (up by 6.3%) and ongoing subsidies to companies (up by 9.1%). In contrast, ongoing grants for pensions and benefits were 1.2% lower than in the same period last year, mainly as a result of a 2.7% fall in spending on basic income support for jobseekers. Up by €2.8bn (3.7%) on the year, subsidies to social security funds accounted for a significant share of the increase in consumption spending in absolute year-on-year terms.However, the rise in consumption spending was slowed by interest expenditure, which was 24.2% lower than in the same period last year as a result of low returns on government bonds and favourable follow-up financing conditions.

Investment spending totalled approximately €17.1bn in the January–July period, exceeding the 2018 figure by 10.4%. This was driven by an 18% year-on-year rise in fixed asset investment. Construction spending in particular was up on the year (by €0.4bn) as was spending for the acquisition of movable assets (by €0.2bn). The rise in spending on financial assistance was driven mainly by higher expenditures on digitalisation, a national innovation programme on hydrogen and fuel cell technology for the 2016–2026 period, and the new home ownership-related child benefit.

Fiscal balance

The federal budget recorded a deficit of €3.8bn for the period from January to July 2019.

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 federal expenditure by function

Trends in federal expenditure by function

Trends in federal expenditure by economic category

Trends in federal expenditure by economic category

Trends in federal revenue

Trends in federal revenue

Tax revenue in July 2019

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

Total tax revenue (excluding local authority taxes) fell by 1.6% on the year in July 2019. This was due to a decline in revenue from joint taxes, driven in particular by value added taxes and non-assessed taxes on earnings. Following three successive months of strong growth, the yield from value added taxes rose only moderately in July 2019 compared with the same month last year. Moreover, revenue from non-assessed taxes on earnings posted a clear year-on-year decline, most likely due to changes in dividend distribution dates. However, the take from wages tax remained on a clear upwards trajectory. Revenue from assessed income tax and corporation tax also increased. Receipts from final withholding tax on interest and capital gains once again posted a significant decline. The yield from taxes accruing solely to the Federation recorded a slight increase of 0.4% over July 2018, while receipts from taxes accruing to the Länder rose by 7.1%.

EU own resources

Transfers of own resources to the EU, including customs duties, totalled approximately €2.6bn in July 2019, a year-on-year increase of 13.5%. 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, monthly fluctuations occur over the course of the year based on the EU’s financing needs at any given time.

Overview of the January-July 2019 period

Total tax receipts increased by 2.3% on the year in the first seven months of 2019. Revenue from joint taxes rose by 2.5%. Taxes accruing to the Federation recorded a rise of 0.7%, while taxes accruing to the Länder were up by 5.4%.

Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants to the Länder ) declined by 3.9% on the year in July 2019. This can be attributed to higher transfers of own resources to the EU and lower receipts from the Federation’s share of revenue from joint taxes (down by 3.7%). Two factors were at play here: first, the percentage of joint taxes accruing to the Federation is lower than it was in 2018. Second, the total yield from joint taxes declined slightly.

The Länder experienced a 1.5% fall in tax revenue due to a lower take from their share of joint taxes, even though the recent change in VAT revenue distribution increased the percentage allocated to the Länder . This was partly compensated by higher receipts from taxes accruing solely to the Länder . The local authorities’ take from joint taxes was up by 4.4% on the year.

Joint taxes

Wages tax

Growth in wages tax receipts continued to be very strong in July 2019, with gross revenue increasing by 4.8% on the year. A year-on-year rise in employment levels and higher incomes both played a role here. Child benefit payments, which are financed from wages tax receipts, rose by 6.4% on the year due to an increase in monthly child benefit of €10 per child from July onwards. On balance, cash receipts from wages tax rose by 4.5% in year-on-year terms in July 2019. Cumulative cash receipts in the January–July 2019 period saw a significant rise of 5.7% on the year.

Corporation tax

Around €36m in corporation tax refunds were paid out in July, which is generally a low-revenue month for this tax. In July last year, refunds totalled €506m, meaning that this month’s result represents a year-on-year improvement. Refunds resulting from assessment activities increased noticeably. Investment allowance payments now have only a marginal impact on the outcome. Cumulative cash receipts from corporation tax were down by 5.3% on the year for the seven months from January to July 2019.

Assessed income tax

Revenue from assessed income tax in July was also mainly generated from assessment activities. Gross receipts from this tax climbed to around €1.1bn (a year-on-year rise of 9.2%). For this tax, too, back payments from assessment activities increased. However, employee refunds saw a significant rise of 5.4%. After subtracting investment allowance payments and owner-occupied homes premiums, which are insignificant in terms of amount, the refund volume in July 2019 was nearly unchanged compared with last year, at approximately €0.6bn. In cumulative terms, cash receipts from assessed income tax were up by 3.1% on the year in the first seven months of 2019.

Non-assessed taxes on earnings

Gross receipts from non-assessed taxes on earnings fell by 39.8% in year-on-year terms in July 2019, following an increase of 38.2% in the previous month. Taking into account an 11.0% 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 fell by 40.4%. Overall, the trend in revenue from non-assessed taxes on earnings tends to be very volatile over the course of the year, reflecting dividend distribution dates. The cumulative result provides a more solid basis for analysis: over the period from January to July 2019, cash receipts from non-assessed taxes on earnings were 2.2% lower than in the same period last year.

Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains posted a year-on-year decline of 26.4% in July. In cumulative terms, cash receipts from this tax were down by 38.7% on the year in the January–July 2019 period. There are no statistics breaking down this figure into its two components, but it can be assumed that capital gains have so far made a significantly smaller contribution to overall revenue from this tax than they did in 2018.

Value added taxes (VAT)

Following significant increases in previous months, receipts from value added taxes posted a year-on-year decline of 1.6% in July 2019. Revenue from domestic VAT rose only moderately, by 0.8%. The take from import VAT suffered a sharp year-on-year drop of 8.4% due to the relatively high 2018 baseline. Cumulative cash receipts from value added taxes were up by 3.1% on the year in the seven-month period from January to July 2019.

Taxes accruing to the Federation

In July 2019, revenue from taxes accruing solely to the Federation was 0.4% up on last year’s level. This slight increase was driven by receipts from motor vehicle tax and solidarity surcharge. The latter benefited from rises in revenue from the taxes to which it is tied and saw an increase of 5.4% on the year. Motor vehicle tax posted a significant 14.2% increase, albeit from a low 2018 baseline. Revenue gains were also posted for energy duty (up by 0.5%), electricity duty (up by 2.1%), aviation tax (up by 3.7%) and alcohol duty (up by 3.0%). Due to a very high 2018 baseline figure, receipts from tobacco duty recorded a 6.9% decline in arithmetic terms, even though the July 2019 figure includes approximately €370 of tobacco duty revenue from the previous month. Receipts from insurance tax and coffee duty were down by 7.4% and 2.5% respectively. Trends in revenue from other taxes had only a minor impact on the overall results for taxes accruing to the Federation.

Taxes accruing to the Länder

Revenue from taxes accruing solely to the Länder was up by 7.1% on the year in July 2019 thanks to increases in receipts from real property transfer tax (up by 6.6%) and inheritance tax (up by 14.0%). The take from fire protection tax posted a year-on-year increase of 12.9%. Receipts from beer duty declined by 9.6% on the year due to ongoing refunds triggered by the European Court of Justice ruling of 17 May 2018 (C-30/17) on flavoured beer and mixed beverages containing beer. Revenue from betting and lottery tax was down by 3.7%.

Borrowing and guarantees

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

 

Authorised

amount

Amount allocated

as of 30 June 2019

Amount allocated

as of 30 June 2018

in €bn

Export credit guarantees

148.0

119.0

118.5

Loans to foreign debtors, foreign direct investment, EIB loans

58.0

44.5

43.0

Financial cooperation projects

28.5

23.5

20.7

Food stockpiling

0.7

0.0

0.0

Domestic guarantees

125.0

105.4

100.8

International financial institutions

80.0

60.1

60.1

Treuhandanstalt successor organisations

1.0

1.0

1.0

Interest compensation guarantees

15.0

15.0

15.0

Calendar

Publication schedule
Monthly report Reporting period Publication date

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

26–27 August 2019

Meeting of German-speaking finance ministers in Luxembourg

4 September 2019

Annual meeting of the Brussels think tank Bruegel in Belgium

13–14 September 2019

Eurogroup and informal ECOFIN meetings in Helsinki, Finland

19 September 2019

Franco-German Financial and Economic Council in Paris

9–10 October 2019

Eurogroup and ECOFIN Council meetings in Luxembourg

16 October 2019

Franco-German Council of Ministers in Paris

17–18 October 2019

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

18–20 October 2019

Annual meetings of the IMF and World Bank in Washington, D.C.