Federal budget trends in April 2021

Table: Trends in the federal budget

Expenditure (€bn)³

441.8

547.7

163.5

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

 

 

+21.4

Revenue (€bn)⁴

311.1

307.3

92.9

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

 

 

-11.5

Tax revenue (€bn)

283.3

284.0

85.9

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

 

 

-5.8

Balance of pass-through funds (€bn)

0.0

0.0

0.0

Fiscal balance (€bn)

-130.7

-240.4

-70.6

Financing/use of surplus:

130.7

240.4

70.6

Cash resources (€bn)

-

-

93.5

Seigniorage (€bn)

0.2

0.2

0.0

Movements in reserves⁵ (€bn)

0

0.0

0.0

Net borrowing⁶ (€bn)

130.5

240.2

-22.9

Any discrepancies in totals are due to rounding.
¹ Supplementary budget pursuant to the Bundesrat decision on the Act Adopting a Supplement to the Federal Budget for the 2021 Fiscal Year (Gesetz über die Feststellung eines Nachtrags zum Bundeshaushaltsplan für das Haushaltsjahr 2021) of 7 May 2021.
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.
⁴ 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.
⁵ Negative values denote accumulation of reserves.
⁶ (-) debt repayment; (+) borrowing.
Source: Federal Ministry of Finance

Actual 2020

2021 target¹

Actual²
April 2021

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2021 supplementary budget

The Bundestag adopted legislation on 23 April 2021 to enact a supplementary budget for 2021. The planned supplementary budget addresses the new pandemic situation, which has changed since the 2021 federal budget was adopted in December 2020. The current circumstances mean that additional assistance and protective measures are necessary, as is an adapted comprehensive vaccination and testing programme. It also means that economic expectations have deteriorated in comparison with the federal government’s 2020 autumn projection. In addition, additional borrowing authorisations will ensure there is adequate financial capacity for the rest of the year. The supplementary budget’s 2021 targets include spending of €547.7bn and revenues of €307.3bn. The 2021 target for new borrowing is now €240.2bn.

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Revenue

Federal revenue in the period from January to April 2021 totalled approximately €92.9bn, down by 11.5% (about €12.1bn) on the year. Tax receipts (also taking into account transfers of own resources to the EU) declined by 5.8% (roughly €5.3bn) compared with the same period in 2020. Revenue from the solidarity surcharge also fell, by 37.6% (approximately €2.2bn), largely due to the abolition this year of the solidarity surcharge for approximately 90% of wages tax and income tax payers. Receipts from income and corporation tax rose by 4.2% (around €1.8bn) on the year. Payments to the EU (GNI-based own resources and VAT-based own resources) increased by about €3.9bn in year-on-year terms.

The category of “other revenue” also posted a decline of 49.3% (about €6.8bn) on the year during the January-April period. This was mainly due to the fact that the Federation’s share of the Bundesbank’s net profits was not remitted. In the previous year, the Bundesbank transferred approximately €5.9bn to the Federation, of which €2.5bn remained in the federal budget. The other €3.4bn had to be allocated to the special investment and redemption fund to repay the fund’s debts.

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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 four months of 2021 totalled around €163.5bn, an increase of 21.4% (roughly €28.8) over the same period last year. A breakdown by economic category shows that higher spending in the January–April period was driven mainly by consumption spending, which was up by 14.7% (approximately €18.7bn). Ongoing grants to public administrations and social security funds made up most of this rise. Grants to public administrations rose by 74.9% (about €7.5bn). This was partly a result of pandemic-related compensation payments under section 21 of the Hospital Financing Act (Krankenhausfinanzierungsgesetz), for which around €3.5bn had been made available up until the end of April 2021. Grants to social security funds were up by 25.6% (around €12.8bn) on the year. This includes roughly €8.1bn in disbursements to the health fund to cover costs caused by the Covid-19 pandemic. These grants also include €3.0bn in disbursements to the health fund’s liquidity reserves for a programme to future-proof hospitals. The increase in consumption spending was tempered by a decline in interest expenditure, which fell by 43.9% (about €1.8bn) on the year.

Investment spending totalled approximately €18.2bn in April 2021, an increase of 126.1% (roughly €10.2bn) over April 2020. The main factor driving this increase was liquidity assistance provided to the Federal Employment Agency (roughly €10.3bn so far this year). In contrast, fixed asset investment was down by 50.4% (about €1.3bn) due to a decline in spending on construction projects. About half of the year-on-year decline in construction spending can be attributed to a special factor that will affect spending over the whole year: as of 2021, investments in trunk road construction are being outsourced to Autobahn GmbH des Bundes (Federal Autobahn GmbH). These funds are being provided to Autobahn GmbH des Bundes in the form of investment grants, which were up by approximately €0.6bn on the year in April 2021. Approximately €5.5bn has been earmarked for these investment grants 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 €70.6bn for the four-month period from January to April 2021.

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 April 2021

2021 trends in tax revenue (excluding local authority taxes)

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Total tax revenue (excluding local authority taxes) was up by 31.9% on the year in April 2021. There was a drop in tax revenue in April 2020 due to a range of tax measures to mitigate the pandemic’s impact on taxpayers, including deferrals and reductions in prepayments. For example, in April 2020 around €6.4bn in tax relief was granted for VAT alone, which is administered by the Länder. For this reason, when interpreting the current data, it is useful to compare the April 2021 results with the pre-crisis figures from April 2019. Tax revenue in April 2021 was around 1.5% (€0.8bn) lower than in April 2019.

Receipts from joint taxes rose by 44.8% on the year in April 2021. VAT revenue posted very significant year-on-year gains of 60.3%. This was mainly the result of the low 2020 baseline, which was caused by tax relief measures. In contrast, taxes accruing solely to the Federation fell by 10.9% on the year in April, largely due to the widespread abolition of the solidarity surcharge and lower revenue from energy duty. Receipts from taxes accruing to the Länder were up by 19.4% over April 2020.

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EU own resources

Transfers of own resources to the EU, including customs duties, were up by almost €0.3bn (9.7%) on the year in April 2021. Monthly fluctuations occur over the course of the year based on the EU’s financing needs at any given time. In general, monthly requisitions are based on the annual EU budget that is in force for the respective year.

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Overview of the January–April 2021 period

In the four months from January to April 2021, tax receipts (excluding local authority taxes) increased by 1.3% compared with the same period in 2020. Revenue from joint taxes rose by 3.4%, while receipts from taxes accruing solely to the Federation were down by 11.3%. Revenue from taxes accruing solely to the Länder was up by 7.9%.

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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 up by 34.4% on the year in April 2021. The Federation’s take from joint taxes increased by 53.4% on the year, mainly due to a 74.2% rise in revenue from value added taxes. Revenue from purely federal taxes was down sharply, by 10.9%, and federal transfers of own resources to the EU increased slightly on the year, both of which reduced the Federation’s tax revenue. In addition, supplementary grants that the Federation pays to the Länder were up slightly on the year in April.

Länder tax receipts also increased markedly on the year in April 2021, by 36.0%. The revenue from joint taxes that is allocated to the Länder rose by 44.0%; as was the case with the Federation, this rise was driven mainly by a sharp year-on-year increase in receipts from value added taxes, which surged by 52.0%. In addition, the yield from taxes that accrue exclusively to the Länder posted a robust gain of 19.4%. Local authorities’ take from their share of joint taxes was 14.5% higher than in the same period last year.

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Joint taxes

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Wages tax

Gross revenue from wages tax was up by 5.9% in year-on-year terms in April 2021. Cash receipts in April included wages tax that was remitted for March 2021. As a result of the ongoing pandemic and the lockdown measures, many companies are continuing to take advantage of the government’s short-time work scheme. This in turn has a negative impact on wages tax revenue. Revenue figures for April 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 thresholds. However, the baseline figure for April 2020 was also significantly impacted by the pandemic and, in particular, by the take-up of the short-time work scheme at the time. Child benefit payments – which are financed from wages tax receipts – rose by 10.0% on the year due to the €15 per child increase in child benefit enacted under the Second Family Tax Burden Reduction Act. Overall, the result was a 5.1% year-on-year rise in cash receipts from wages tax in April. In cumulative terms, cash receipts from wages tax were up by 2.3% on the year in the first four months of 2021.

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Corporation tax

Revenue from corporation tax totalled around €1.2bn in April 2021. In April 2020, around €2.5bn in refunds was paid out. The low baseline for 2020 was largely the result of pandemic-related measures taken on the basis of secondary legislation. Tax authorities reduced prepayments for the first quarter of 2020 that had already been made in March 2020, and granted a significant volume of deferrals. On balance, this led to a negative revenue total in April 2020. Because of their low volume, investment allowance payments had hardly any influence on receipts in April 2021. As a result, cash receipts from corporation tax were up significantly on the year in April 2021, by €3.7bn. Cumulatively, cash receipts from corporation tax increased by 90.5% in year-on-year terms in the first four months of 2021.

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Assessed income tax

Gross receipts from assessed income tax rose by 23.3% on the year in April 2021. Here, too, deferrals and lower prepayments are likely to have reduced the 2020 baseline. Employee refunds declined by 25.9% 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 approximately €1.0bn in April. In cumulative terms, cash receipts from assessed income tax were up by 0.8% on the year in the first four months of 2021.

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Non-assessed taxes on earnings

The gross yield from non-assessed taxes on earnings fell by 4.1% on the year in April 2021. Refunds by the Federal Central Tax Office, which are financed from this revenue, totalled about €87m (down by 20.2% on the year). Overall, cash receipts from non-assessed taxes on earnings fell by 2.8% in April 2021 compared with the same period last year. Cumulatively, cash receipts from non-assessed taxes on earnings were down by 11.5% on the year in the first four 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 grew by 51.5% on the year in April 2021. Cumulative cash receipts from this tax were up by 34.7% on the year in the first four months of 2021.

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Value added taxes

Revenue from value added taxes rose by 60.3% in year-on-year terms in April 2021 as a result of pandemic-related one-off effects in the 2020 reference period. Receipts from domestic VAT and import VAT increased by 91.0% and 13.4%, respectively. This was mainly due to comprehensive pandemic-related tax relief for businesses, which was reflected in cash receipts in April 2020. A total of around €6.4bn in tax relief was provided at the time, with tax authorities reducing and refunding special prepayments, granting deferrals and suspending enforcement measures. Also, in the case of import VAT, the 2020 baseline was probably affected by a downturn in foreign trade due to the pandemic. Cumulatively, cash receipts from value added taxes rose by 2.3% on the year in the first four months of 2021.

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Taxes accruing to the Federation

In April 2021, revenue from taxes accruing solely to the Federation was down by 10.9% compared with the same month last year. Energy duty, motor vehicle tax, tobacco duty and sparkling wine duty all posted significant declines in revenue, falling by 13.8%, 14.5%, 10.5% and 21.3%, respectively. Revenue from the solidarity surcharge fell most sharply, by 47.8%, mainly due to the widespread abolition of the requirement to pay solidarity surcharge. In contrast, receipts from electricity duty showed clear growth of 19.2%. Revenue gains were also recorded for insurance tax and coffee duty, whose yields increased by 17.9% and 10.3%, respectively. Trends in revenue from other taxes had only a minor impact on overall receipts from federal taxes. In cumulative terms, cash receipts from taxes accruing solely to the Federation were down by 11.3% on the year in the January–April period.

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Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder were up sharply in April 2021, by 19.4% on the year. Some of these taxes posted significant revenue growth, with revenue from real property transfer tax, inheritance tax, fire protection tax and betting and lottery tax increasing by 17.5%, 18.8%, 14.8% and 30.8%, respectively. Receipts from beer duty climbed by 53.4%. In cumulative terms, cash receipts from taxes accruing solely to the Länder were up by 7.9% on the year in the first four months of 2021.

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Borrowing and guarantees

Borrowing trends for the Federation in April 2021

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

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

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Guarantees

 

Authorised amount

Amount allocated as of 31 March 2021

Amount allocated as of 31 March 2020

in €bn

Export credit guarantees

155.0

121.9

126.1

Loans to foreign debtors, foreign direct investment, EIB loans

75.0

36.0

41.9

Financial cooperation projects

35.0

32.2

26.8

Food stockpiling

0.7

0.0

0.0

Domestic guarantees

430.0

302.9

197.8

International financial institutions

110.0

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

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

21–22 May 2021

Eurogroup and informal ECOFIN meetings in Lisbon, 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

10–11 September 2021

Eurogroup and informal ECOFIN meetings in Ljubljana, Slovenia

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