Federal budget trends up to and including November 2020

Table: Trends in the federal budget

Expenditure (€bn)³

343.2

508.5

397.6

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

 

 

+26.9

Revenue (€bn)

356.5

290.4

264.0

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

 

 

-13.8

Tax revenue (€bn)

329.0

264.4

239.7

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

 

 

-14.7

Balance of pass-through funds (€bn)

0.0

0.0

0.0

Fiscal balance (€bn)

13.3

-218.1

-133.6

Financing/use of surplus:

-13.3

218.1

133.6

Cash resources (€bn)

-

-

31.5

Seigniorage (€bn)

0.2

0.3

0.3

Movements in reserves (€bn)

-13.5

0.0

0.0

Net borrowing (€bn)

0.0

217.8

101.9

Any discrepancies in totals are due to rounding.
¹ Second supplement to the 2020 federal budget (Federal Law Gazette I No 35, p. 1669).
² As per accounts.
³ With the exception of expenditure on the repayment of debt incurred on the credit market, allocations to reserves and expenditure made to cover a cash deficit. Excluding expenditure from internal offsetting.
With the exception of revenue from loans on the credit market, withdrawals from reserves, revenue from cash surpluses and seigniorage. Excluding revenue from internal offsetting.
Negative values denote accumulation of reserves.
(-) debt repayment; (+) borrowing
Source: Federal Ministry of Finance

Actual 2019

2020 target¹

Actual²
January to
November 2020

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Revenue

Federal revenue in the period from January to November 2020 totalled approximately €264.0bn, down by 13.8% (roughly €42.2bn) on the year. This decline is due primarily to the effects of the Covid-19 pandemic and the associated tax-related assistance measures that have been adopted to help manage the crisis. Tax receipts (also taking into account transfers of own resources to the EU) declined by 14.7% (roughly €41.4bn) compared with the same period in 2019. Receipts from value added taxes as well as from income and corporation tax have been particularly affected, falling by €22.0bn and €10.9bn, respectively.

The category of “other revenue” was down by 3.3% (roughly €0.8bn) on the year in the January–November period. This can be attributed to lower revenue from business activities as well as from claims arising from guarantees. 

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Expenditure

By adopting two supplementary budgets, the German government has taken decisive action in response to the challenges posed by the coronavirus pandemic both to health and to the economy. The additional expenditure contained in the supplementary budgets now strongly influences the structure of federal spending. Federal expenditure in the January–November 2020 period totalled approximately €397.6bn, an increase of 26.9% (about €84.2bn) over the same period last year. A breakdown by economic category shows that the increase in spending during the January–November period was mainly due to growth in consumption spending, which was up by 27.1% (approximately €76.8bn). Ongoing grants to public administrations made up most of this rise. This includes grants to the Energy and Climate Fund totalling roughly €27.6bn, which will be used to finance measures contained in the stimulus package. Ongoing grants to the Länder were significantly higher on the year as well. This category includes roughly €9.0bn in compensation payments under section 21 of the Hospital Financing Act (Krankenhausfinanzierungsgesetz), out of the €11.5bn earmarked for this purpose for 2020. Spending on ongoing subsidies to companies also increased significantly. By the end of November 2020, approximately €14.4bn in immediate assistance for small companies and self-employed individuals affected by the fallout from the Covid-19 pandemic had been disbursed, out of the €18.0bn earmarked for this purpose in the second supplementary budget. Approximately €5.7bn in additional funds for ongoing grants to social institutions to fight the coronavirus have been spent (2020 target: €9.1bn). Grants to social security funds were up by €9.2bn (7.6%) on the year. This includes disbursements to the health fund and the long-term care insurance compensation fund totalling €5.3bn, the entire amount earmarked for these funds. The increase in consumption spending was tempered by a decline in interest expenditure, which was down by 58.8% (about €7.0bn) on the year.

Investment spending totalled approximately €37.0bn in the January–November period, an increase of 24.9% (roughly €7.4bn) over the same period last year. The main factor driving this increase was liquidity assistance provided to the Federal Employment Agency (roughly €6.5bn so far this year). Over the January–November period, the figures for grants and subsidies constituting investments were subject to effects that basically cancelled each other out. On the one hand, grants to the Länder declined by approximately €3.5bn, primarily as a result of the discontinuation of compensation payments from the Federation to the Länder for purposes including social housing. This is part of a reorganisation of financial relations between the federal government and the Länder that took effect at the start of 2020. Instead of receiving compensation payments, the Länder now receive a higher share of VAT revenue. On the other hand, grants to special funds (for digital infrastructure and the expansion of childcare facilities) increased by a total of €1.4bn, and subsidies to other areas (including federal subsidies towards construction costs for maintaining railway infrastructure) rose by approximately €2.2bn on the year. In the January–November 2020 period, spending on the acquisition of movable assets was 27.7% (about €0.5bn) higher than in the same period last year. Spending on construction projects was slightly down on the year, by 2.4%.

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Fiscal balance

The federal budget posted a deficit of €133.6bn for the period from January to November 2020.

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 any given 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 the case in the current circumstances.

Trends in federal expenditure by function

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Trends in federal expenditure by economic category

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Trends in federal revenue

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Tax revenue in November 2020

2020 trends in tax revenue (excluding local authority taxes)

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Total tax revenue (excluding local authority taxes) was down by 7.0% in November 2020 compared with the same month last year. The economic effects of the coronavirus pandemic continued to have a negative impact on tax revenue. As in previous months, virus-related measures taken on the basis of secondary legislation also affected tax revenue. In November, incoming payments of previously deferred taxes exceeded the amount of newly granted deferrals, and this had a moderately positive impact on revenue. The temporary cuts in VAT rates in the second half of 2020 continue to reduce VAT receipts. Wages tax revenue also fell sharply. In November 2020, receipts from joint taxes were down by 8.1% on the year. Revenue from taxes accruing solely to the Federation declined by 3.8%. In contrast, receipts from taxes accruing solely to the Länder were up by 5.8% on the year due to strong growth in receipts from inheritance tax.

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EU own resources

Transfers of own resources to the EU, including customs duties, climbed by about €3.5bn on the year in November 2020 to roughly €4.8bn, up from €1.3bn in November 2019. In October 2020, the EU approved an amending budget for the current year. In November, the outstanding own resources contributions resulting from the amending budget were settled retroactively for all prior months in 2020. This led to a peak in monthly payments of own resources. Monthly fluctuations occur over the course of the year based on the EU’s financing needs at any given time. In general, they are based on the annual EU budget that is in force for the respective year.

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Overview of the January–November 2020 period

In the first eleven months of 2020, total tax receipts were down by 8.0% on the year. Revenue from joint taxes was down by 9.4%, and revenue from taxes accruing solely to the Federation was down by 4.3%. Revenue from taxes accruing solely to the Länder grew by 7.3%.

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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) fell by 31.0% on the year in November 2020. The Federation’s take from joint taxes declined by 17.8%. Among other factors, an amendment of the Financial Equalisation Act (Finanzausgleichsgesetz) under the Second Coronavirus Tax Assistance Act (Zweites Corona-Steuerhilfegesetz) has led to a significant year-on-year reduction in the Federation’s share of revenue from value added taxes and increased the shares of the Länder and local authorities accordingly. The purpose of this was to compensate the Länder for their lower tax revenue resulting from (a) the one-time bonus for families with children, which is financed from wages tax revenue, and (b) the temporary reduction in the VAT rate. The reduction in the VAT rate has caused revenue from value added taxes to fall significantly overall. In November, the Federation’s take from VAT revenue was down by 32.6% on the year. In addition to lower VAT revenue, another factor driving the sharp decline in the Federation’s tax receipts in November was the steep year-on-year increase in own resources payments to the EU. Receipts from taxes accruing solely to the Federation fell by 3.8%. Moreover, supplementary federal grants to the Länder were higher than in November 2019.

Länder tax receipts were up slightly by 1.9% on the year in November 2020. Even though overall VAT revenue fell by 15.8% on the year in November, Länder VAT revenue remained basically constant in year-on-year terms (down by just 0.4%). This is due to the reallocation of VAT revenue described above. However, the decline in wages tax receipts (due to the short-time work scheme) and the discontinuation of the increased trade tax apportionment had a negative impact on Länder tax revenue totals. Länder receipts from joint taxes were up slightly by 0.6% overall. In addition, the yield from taxes that accrue exclusively to the Länder posted a robust gain of 5.8%. The revenue from joint taxes allocated to local authorities was down by 1.2% on the year.

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Joint taxes

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Wages tax

Cash receipts from wages tax were down markedly by 5.7% on the year in November 2020. Gross wages tax revenue was down by 2.9% on the year, due mainly to the effects of the partial lockdown. Company notifications regarding short-time work increased considerably in November. Child benefit payments – which are financed from wages tax receipts – rose by 6.4% on the year. In cumulative terms, cash receipts from wages tax were down by 5.7% on the year in the first eleven months of 2020.

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Corporation tax

Gross revenue from corporation tax totalled approximately ‑€130m in November, which is generally a low-revenue month for this tax. This was an improvement over the previous November, when gross revenue amounted to ‑€622m. Investment allowance payments hardly affected the overall result due to their low volume. As a result, cash receipts from corporation tax also amounted to roughly ‑€130m. Cumulatively, cash receipts from corporation tax were down by 32.9% on the year in the first eleven months of 2020.

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Assessed income tax

As with corporation tax, assessment activity was the main factor driving the gross yield from assessed income tax in November. Gross receipts from this tax rose moderately to around €0.9bn, a year-on-year gain of 11.7%. Employee refunds were down by 4.0% on the year in November. After these are subtracted from the gross figure (along with investment allowance payments and owner-occupied homes premiums, which are insignificant in terms of amount), net receipts from assessed income tax totalled approximately ‑€128m in November 2020 (compared with ‑€263m in November 2019). In cumulative terms, cash receipts from assessed income tax were down by 9.3% on the year in the January–November period.

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Non-assessed taxes on earnings

Gross receipts from non-assessed taxes on earnings were up by 57.5% on the year in November 2020. Refunds by the Federal Central Tax Office, which are financed from this revenue, totalled about €77m. As a result, cash receipts from non-assessed taxes on earnings were up by 70.8% over the previous November. Corporate shareholders’ meetings have been delayed this year due to the coronavirus pandemic, and as a result the timing of dividend payments decided at these meetings has shifted as well. Cumulatively, cash receipts from non-assessed taxes on earnings were down by 12.8% on the year in the first eleven months of 2020.

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Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains grew by 25.3% on the year in November 2020. So far this year, monthly revenue from this tax has fluctuated significantly, as economic trends have apparently led investors to realise gains from their investments in securities. In cumulative terms, cash receipts from final withholding tax on interest and capital gains posted a gain of 28.2% in the January–November 2020 period.

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Value added taxes

Receipts from value added taxes fell by 15.8% on the year in November, with declining yields from both domestic VAT (down by 12.8%) and import VAT (down by 24.8%). This was mainly the result of the temporary cuts in VAT rates during the second half of 2020. Cumulative cash receipts from value added taxes were down by 9.8% on the year in the January–November period.

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Taxes accruing to the Federation

In November 2020, revenue from taxes accruing solely to the Federation was down by 3.8% compared with the same month last year. In the case of some taxes, the tax measures that were introduced to improve the liquidity of companies resulted in a decline in revenue. November saw revenue gains for energy duty (up by 2.2%), insurance tax (up by 2.1%) and alcohol duty (up by 16.5%). In contrast, receipts from electricity duty and tobacco duty were down on the year, by 3.5% and 22.6%, respectively. In the case of tobacco duty, roughly €230m in revenue from November was not posted until December. Global air traffic came to an almost complete halt as a result of the shutdown in spring 2020. This, together with tax deferrals, caused aviation tax revenue to plummet by 90.4% on the year in November. Revenue from the solidarity surcharge rose moderately by 2.8% as a result of higher receipts from income tax and corporation tax (which constitute its tax base). Trends in revenue from other taxes had only a minor impact on overall receipts from federal taxes. The cumulative yield from federal taxes was down by 4.3% on the year in the first eleven months of 2020.

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Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder were up by 5.8% on the year in November 2020. This was driven primarily by a significant increase in revenue from inheritance tax, which was up by 14.6%. Other taxes posting revenue growth included beer duty (up by 9.7%), betting and lottery tax (up by 1.1%), real property transfer tax (up by 2.5%) and fire protection tax (up by 3.9%). Cumulative receipts from Länder taxes rose by 7.3% on the year in the January–November 2020 period.

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Borrowing and guarantees

Borrowing trends for the Federation in November 2020

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Debt trends for the federal budget and the Federation’s special funds November 2020

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Trends in refinancing the special funds that provide loans to federal public institutions in November 2020

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Guarantees

 

Authorised amount

Amount allocated
as of
30 September 2020

Amount allocated
as of
30 September 2019

in €bn

Export credit guarantees

160.0

125.6

119.0

Loans to foreign debtors, foreign direct investment, EIB loans

80.0

40.6

43.0

Financial cooperation projects

35.0

28.6

24.9

Food stockpiling

0.7

0.0

0.0

Domestic guarantees

430.0

273.2

104.8

International financial institutions

100.0

68.6

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 schedule¹ of the monthly reports

Monthly report

Reporting period

Publication date

January 2021 issue

December 2020

29 January 2021

February 2021 issue

January 2021

19 February 2021

March 2021 issue

February 2021

19 March 2021

April 2021 issue

March 2021

22 April 2021

May 2021 issue

April 2021

20 May 2021

June 2021 issue

May 2021

22 June 2021

July 2021 issue

June 2021

22 July 2021

August 2021 issue

July 2021

20 August 2021

September 2021 issue

August 2021

21 September 2021

October 2021 issue

September 2021

21 October 2021

November 2021 issue

October 2021

19 November 2021

December 2021 issue

November 2021

21 December 2021

¹ In accordance with the IMF’s Special Data Dissemination Standard Plus (SDDS Plus); see http://dsbb.imf.org
Source: Federal Ministry of Finance

Key dates on the fiscal and economic policy agenda

18–19 January 2021

Eurogroup and ECOFIN Council meetings

15–16 February 2021

Eurogroup and ECOFIN Council meetings

26–27 February 2021

Meeting of G20 finance ministers and central bank governors in Italy

15–16 March 2021

Eurogroup and ECOFIN Council meetings

7–8 April 2021

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

8–11 April 2021

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

16–17 April 2021

Eurogroup and informal ECOFIN meetings in Portugal

Due to the coronavirus pandemic, dates and the format of meetings will be specified at short notice prior to the respective meetings.