Federal budget trends in February 2021

Table: Trends in the federal budget

Expenditure (€bn)²

441.8

498.6

89.7

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

 

 

+36.1

Revenue (€bn)³

311.1

318.6

37.7

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

 

 

-20.9

Tax revenue (€bn)

283.3

292.8

34.7

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

 

 

-21.0

Balance of pass-through funds (€bn)

0.0

0.0

0.0

Fiscal balance (€bn)

-130.7

-180.1

-52.0

Financing/use of surplus:

130.7

180.1

52.0

Cash resources (€bn)

-

-

84.2

Seigniorage (€bn)

0.2

0.2

0.0

Movements in reserves⁴ (€bn)

0

0.0

0.0

Net borrowing (€bn)

130.5

179.8

-32.1

Any discrepancies in totals are due to rounding.
¹ As per accounts.
² 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.
³ 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.
⁴ Negative values denote accumulation of reserves.
⁵ (-) debt repayment; (+) borrowing.
Source: Federal Ministry of Finance

Actual 2020

2021 target

Actual¹
February 2021

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Revenue

Federal revenue in the first two months of 2021 totalled approximately €37.7bn, down by 20.9% (roughly €9.9bn) compared with the same period last 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 revenue (also taking into account transfers of own resources to the EU) declined by 21.0% (about €9.2bn) compared with the same period in 2020. Receipts from value added taxes, which were down by roughly €4.7bn on the year, have been particularly affected.

The category of “other revenue” posted a decline of 19.7% (about €0.7bn) on the year during this period. This was mainly due to a decline in administrative fines paid to the Federal Cartel Office.

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Expenditure

In 2020, extraordinary measures were taken to fight the coronavirus pandemic and to mitigate its economic and social consequences. Budget execution in 2021 will also be heavily influenced by measures to counteract the pandemic and its effects.

Federal expenditure in the first two months of 2021 totalled approximately €89.7bn, an increase of 36.1% (about €23.8bn) over the same period last year. A breakdown by economic category shows that higher spending in January and February was driven mainly by consumption spending, which was up by 29.1% (approximately €18.1bn). Ongoing grants to social security funds, which were up by €10.0bn (35.1%) on the year, accounted for the bulk of this increase. This includes roughly €6.0bn in disbursements to the health fund to cover costs caused by the SARS-CoV-2 pandemic. This means that about 78% of the budgeted funds (about €7.7bn) have been disbursed. These grants also include €3.0bn in disbursements to the health fund’s liquidity reserves for a programme to future-proof hospitals; this is the full amount that was budgeted for this purpose. Ongoing subsidies to companies were up by 77.7% on the year (roughly €4.6bn), due mainly to the pandemic-related assistance that is being provided to businesses. The federal budget includes €39.5bn for these ongoing subsidies in 2021; by the end of February, €6.2bn had been disbursed. The increase in consumption spending was tempered by a decline in interest expenditure, which was down by 20.8% (about €1.1bn) on the year.

Investment spending totalled approximately €9.5bn in the January–February 2021 period, an increase of 152.9% (roughly €5.7bn) over the same period last year. The main factor driving this increase was liquidity assistance provided to the Federal Employment Agency (roughly €5.4bn so far this year). In contrast, fixed asset investment was down by 50.6% (about €0.6bn) due to a decline in spending on construction projects. The year-on-year decline in construction spending is due mainly to a special factor that will affect the entire year: starting in 2021, investments in highway construction are being outsourced to Autobahn GmbH des Bundes (Federal Autobahn GmbH). These funds will be provided in the form of investment grants. Approximately €5.5bn has been earmarked for this purpose in 2021. As a result, about €4.7bn less has been budgeted for construction investment in 2021 than in 2020 (and about €4.2bn less than the amount that was actually spent on construction investment in 2020).

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Fiscal balance

The federal budget recorded a deficit of €52.0bn for the January–February 2021 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 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.

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 February 2021

2021 trends in tax revenue (excluding local authority taxes)

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Total tax revenue (excluding local authority taxes) in February 2021 was down by 7.2% 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, pandemic-related measures (deferrals, waived enforcement measures, reductions in prepayments) taken on the basis of secondary legislation also affected tax revenue. Receipts from joint taxes were down by 7.8% on the year in February. VAT revenue from December 2020 was not reflected in cash receipts until February 2021; this means that February’s VAT revenue figures were negatively affected by the temporary reduction of VAT rates during the second half of 2020. Revenue figures for import VAT were also significantly lower in February because the payment deadline was pushed back to the end of the month. In contrast, the yields from corporation tax and final withholding tax on interest and capital gains were up sharply in year-on-year terms. Revenue from taxes accruing solely to the Federation was down by 6.7% on the year in February, while receipts from taxes accruing to the Länder were up by 4.8%.

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EU own resources

Transfers of own resources to the EU, including customs duties, were up by €3.5bn on the year in February 2021. 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–February 2021 period

In the first two months of 2021, total tax receipts were down by 9.1% on the year. Revenue from joint taxes was down by 9.7%, and receipts from taxes accruing solely to the Federation were down by 7.0%. Revenue from taxes accruing solely to the Länder was up slightly by 0.2%.

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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 23.3% on the year in February 2021. The Federation’s take from joint taxes fell by 8.8% on the year, mainly due to a decline in revenue from value added taxes. In addition, revenue from purely federal taxes was down sharply by 6.7%, and federal transfers of own resources to the EU were significantly higher on the year. In contrast, supplementary grants that the Federation pays to the Länder were slightly down on the year in February.

Länder tax receipts were also down markedly on the year in February 2021, by 5.8%. The revenue from joint taxes that is allocated to the Länder fell by 7.6%; as was the case with the Federation, this decline was driven mainly by a sharp drop in receipts from value added taxes. In contrast, the yield from taxes that accrue exclusively to the Länder posted a substantial gain of 4.8%. Local authorities’ take from their share of joint taxes was down by 2.6% on the year.

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Joint taxes

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Wages tax

Gross wages tax revenue in February 2021 was down by 2.1% on the year. Cash receipts in February included wages tax that was remitted for January 2021. The current lockdown measures, which took effect in November 2020 and were intensified on 16 December 2020, led to an increase in short-time work. This in turn had a negative impact on wages tax revenue. Revenue figures for February were also lower due to (a) the increase in the basic personal allowance, which was enacted as part of the Second Family Tax Burden Reduction Act (Zweites Familienentlastungsgesetz) and (b) the related shift in the other tax bracket thresholds. Child benefit payments – which are financed from wages tax receipts – rose by 7.0% on the year due to the €15 per child increase in child benefit enacted under the Second Family Tax Burden Reduction Act. These factors led to a 3.6% year-on-year decline in cash receipts from wages tax in the month of February. In cumulative terms, cash receipts from wages tax were down by 5.1% on the year in the first two months of 2021.

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Corporation tax

Gross revenue from corporation tax totalled approximately €1.1bn in February 2021. The corresponding amount in the same month last year was only €11m. This increase resulted mainly from routine tax assessments. Investment allowance payments had only a minimal impact on the overall outcome due to their low volume. As a result, cash receipts from corporation tax in February were also up sharply on the year by €1.1bn. In cumulative terms, cash receipts from corporation tax were up by €1.5bn on the year in the first two months of 2021.

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Assessed income tax

Gross receipts from assessed income tax rose by 4.6% on the year in February 2021. Employee refunds declined by 8.5% on the year; 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 cash receipts from assessed income tax posted a strong year-on-year gain of 17.8% in February. In cumulative terms, cash receipts from assessed income tax were up by 4.1% on the year in the first two months of 2021.

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Non-assessed taxes on earnings

Gross receipts from non-assessed taxes on earnings were up by 3.5% on the year in February 2021. Refunds by the Federal Central Tax Office, which are financed from this revenue, totalled about €74m (down by 11.7% on the year). Overall, cash receipts from non-assessed taxes on earnings grew by 5.5% on the year in February 2021. Cumulatively, cash receipts from non-assessed taxes on earnings were down by 28.3% on the year in the first two months of 2021.

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Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains totalled €1.4bn in February, up sharply by €0.7bn in year-on-year terms. Taken cumulatively, cash receipts from final withholding tax on interest and capital gains were up by 44.4% on the year in the first two months of 2021.

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Value added taxes

Receipts from value added taxes were down by 18.8% on the year in February. Long-term extensions for declaring and remitting VAT have been granted to most businesses. As a result, cash receipts from domestic VAT in January 2021 included most of the VAT collected by businesses in December 2020. Revenue from domestic VAT was down by 5.9% on the year in February, due in part to the temporary reduction of VAT rates in the second half of 2020. Revenue from import VAT was down by 67.1% on the year in February. This steep decline is related to the deferred deadline for paying import VAT on goods imported in December 2020. Under the Second Coronavirus Tax Assistance Act (Zweites Corona-Steuerhilfegesetz), the deadline was pushed back from 16 January 2021 to 26 February 2021. Because the new payment deadline was so close to the end of the month, a large part of these payments was not reflected in the cash figures for February. Cumulatively, cash receipts from value added taxes were down by 18.5% on the year in the first two months of 2021.

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Taxes accruing to the Federation

In February 2021, revenue from taxes accruing solely to the Federation was down by 6.7% compared with the same month last year. For some taxes, the tax measures that were introduced to improve the liquidity of companies resulted in a decline in revenue. Coffee duty, electricity duty and aviation tax all posted declines in revenue (down by 23.6%, 30.5% and 64.0%, respectively). Revenue from the solidarity surcharge also fell, by 55.1%, due to the abolition of the surcharge for approximately 90% of wages tax and income tax payers. However, the decline in solidarity surcharge receipts was tempered somewhat by increases in revenue from the taxes that make up its base (especially corporation tax and final withholding tax on interest and capital gains). Insurance tax revenue was down slightly on the year by 0.4%. In contrast, tobacco duty and alcohol duty posted increases in revenue (up by 7.9% and 3.6%, respectively). Trends in revenue from other taxes had only a minor impact on overall receipts from federal taxes. Cumulatively, cash receipts from taxes accruing solely to the Federation were down by 7.0% on the year in the first two months of 2021.

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Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder were up by 4.8% on the year in February 2021. All of these taxes posted revenue gains, with robust rates of growth in some cases such as real property transfer tax (up by 2.8%), inheritance tax (up by 8.7%), fire protection tax (up by 3.5%), betting and lottery tax (up by 8.3%) and beer duty (up by 5.1%). In cumulative terms, cash receipts from taxes accruing solely to the Länder were up by 0.2% on the year in the first two months of 2021.

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Borrowing and guarantees

Borrowing trends for the Federation in February 2021

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Borrowing trends for the Federation (budget and special funds, excluding loan financing) in February 2021

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Borrowing trends for the Federation (loan financing) in February 2021

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Guarantees

 

Authorised amount

Amount allocated as of 31 December 2020

Amount allocated as of 31 December 2019

in €bn

Export credit guarantees

160.0

125.3

125.2

Loans to foreign debtors, foreign direct investment, EIB loans

80.0

37.0

42.8

Financial cooperation projects

35.0

30.0

25.6

Food stockpiling

0.7

0.0

0.0

Domestic guarantees

430.0

274.3

115.8

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

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

Monthly report

Reporting period

Publication date

Key dates on the fiscal and economic policy agenda

7 April 2021

Meeting of G20 finance ministers and central bank governors (virtual event)

8–10 April 2021

Spring meeting of the IMF and World Bank (virtual event)

16 April 2021

Eurogroup and ECOFIN Council meetings (virtual events)

21–22 May 2021

Eurogroup and informal ECOFIN meetings in Portugal

17–18 June 2021

Eurogroup and ECOFIN Council meetings in Luxembourg

9–10 July 2021

Meeting of G20 finance ministers and central bank governors in Venice, Italy

12–13 July 2021

Eurogroup and ECOFIN Council meetings in Brussels

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