Revenue

Federal revenue for the period from January to September 2022 totalled approximately €256.7bn, up by 10.1% (about €23.6bn) on the year. Tax receipts (including EU own resources that are subtracted from the total) increased by 10.1% (about €22.0bn) on the year. Revenue from value added taxes rose by 22.2% (about €18.5bn), while receipts from income tax and corporation tax grew by 7.9% (about €8.9bn). Federal revenue fell as a result of a year-on-year increase of approximately €4.1bn in public transport subsidies to the Länder. These additional subsidies were used to offset revenue losses in the public transport sector resulting from the Covid pandemic and to finance the 9-euro ticket scheme (a temporary reduced-rate public transport ticket costing €9 per month in the months of June, July and August 2022).

The category of “other revenue” recorded a gain of 9.8% (about €1.6bn) on the year in the January–September 2022 period.

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Expenditure

Federal expenditure in the first nine months of 2022 totalled approximately €347.5bn, down by 5.2% (about €18.9bn) on the year. A breakdown by economic category shows that consumption spending recorded a slight year-on-year decline of 1.3% (about €4.4bn). There were several contrasting trends overall. For example, ongoing subsidies to social security funds were up by about €11.4bn on the year, which increased spending levels. This includes higher federal payments (totalling roughly €11.7bn) to the health fund and the long-term care insurance compensation fund to cover pandemic-related costs, and lower spending due to the elimination of €3.0bn in grants for a programme to future-proof hospitals. In addition, spending on subsidies for the procurement of Covid vaccines rose by around €3.3bn on the year in the January–September 2022 period. Operating expenditure was also up by 15.2% (roughly €3.6bn) on the year, due primarily to costs incurred in connection with the build-up and release of gas reserves. Approximately €1.5bn was spent for this purpose in the first nine months of 2022. The overall rise in interest rates meant that interest expenditure more than doubled on the year, increasing by 202.8% (around €10.0bn) from a relatively low baseline. The reduction in spending compared with the same period last year was mainly due to lower subsidies to companies, which fell by 40.3% (around €21.8bn), and lower grants to public administrations, which were down by 28.3% (approximately €14.0bn). The former trend can be attributed primarily to the decline in assistance to businesses affected by the fallout from the coronavirus pandemic, which fell from approximately €31.2bn in the first nine months of 2021 to roughly €10.0bn so far this year. The one-off grant of €16.0bn that was allocated to the special fund for reconstruction aid (Aufbauhilfe 2021) in September 2021 explains the significant year-on-year decline in grants to public administrations.

Investment spending totalled about €24.9bn in the first nine months of 2022, down by 36.9% (roughly €14.6bn) on the year. This was mainly because the liquidity assistance provided to the Federal Employment Agency in the January–September period was around €14.6bn lower than in the same period of 2021. At the end of the 2021 budget year, the assistance granted over the course of the year that was not repaid by the end of the budget year was converted into a subsidy for the Federal Employment Agency. Fixed asset investment in the January–September period remained roughly at the same level as in the same period last year.

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Fiscal balance

The federal budget recorded a deficit of approximately €90.8bn for the January–September 2022 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.

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Tax revenue in September 2022

Total tax revenue (excluding local authority taxes) was down by 9.0% on the year in September 2022. Revenue from joint taxes declined by 9.3%, mainly as a result of a sharp decline in wages tax revenue, which in turn can be attributed to the disbursement of the energy price allowance in September 2022. Receipts from taxes accruing solely to the Federation fell by 10.6%. This is mainly due to the cut in energy duty rates set out in the Energy Duty Reduction Act (Energiesteuersenkungsgesetz) for the June–August 2022 period, which is resulting in substantially lower energy duty receipts in the three months from August to October. Receipts from taxes accruing to the Länder declined by 7.7%, primarily due to the drops in revenue from real property transfer tax and inheritance tax, the two highest-yielding Länder taxes.

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EU own resources

Transfers of own resources to the EU, excluding customs duties, were down by 5.7% on the year in September 2022. In general, monthly requisitions are based on the annual EU budget that is in force for the respective year and are distributed relatively evenly across individual months. The 2022 annual EU budget is similar to last year’s in terms of volume.

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Cumulative overview of the January–September 2022 period

On a cumulative basis, the January–September 2022 period was marked by a strong year-on-year increase of 9.7% in tax revenues overall (excluding local authority taxes). This is partly due to the fact that the 2021 baseline, especially in the first half of the year, was impacted by the economic effects of the Covid pandemic and by the statutory and administrative tax measures that were taken in response. In the January–September 2022 period, receipts from joint taxes were up by 11.2% on the year, revenue from federal taxes posted a slight decline of 0.1%, and the yield from taxes accruing to the Länder was up by 3.0%.

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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 6.7% on the year in September 2022. The two main factors behind this are the disbursement of the energy price allowance and the year-on-year fall in receipts from federal taxes, which can be attributed primarily to the decline in revenue from energy duty. The disbursement of the energy price allowance meant that the Federation’s take from joint taxes fell by 4.8% on the year. This decline would have been more pronounced if not for the fact that the shares of revenue from value added taxes allocated to the Länder under the fiscal equalisation system were substantially lower in September 2022 than in the same month of 2021, when they were significantly elevated due to the measures taken in response to the pandemic. As a result, the Federation’s share of VAT revenue in September 2022 was approximately 47.3%, up from approximately 42.3% last year. The supplementary grants and the subsidies for public transport paid by the Federal government to the Länder were somewhat higher in September 2022 than in the same month last year, whereas the transfers of own resources to the EU were somewhat lower (see above).

Länder tax receipts (after accounting for supplementary federal grants) recorded a year-on-year decline of 9.3% in September 2022. Revenue from taxes accruing solely to the Länder declined by 7.7%, and receipts from the Länder share of joint taxes were also lower, falling by 10.2% on the year. Mirroring the Federation’s revenue trends, the Länder saw a decline in their share of value added tax receipts, from the significantly elevated level of 53.6% in September 2021 to about 49.9% in September 2022, as a result of the lower fixed VAT amounts under the fiscal equalisation system. Local authorities’ take from their share of joint taxes was down by 26.2% on the year. Local authorities’ fixed VAT amounts under the fiscal equalisation system also experienced a year-on-year decline from the inflated level recorded last year – their share of value added tax receipts fell from approximately 3.8% in September 2021 to approximately 2.8% in September 2022.

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Joint taxes

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Wages tax

Gross revenue from wages tax was down significantly in September 2022, by 43.4% on the year. This can be attributed to the disbursement of the €300 energy price allowance to all employees in September and was further exacerbated by the effects of the increase in the basic personal allowance and the standard income tax allowance for employees, a change adopted with retroactive effect from 1 January 2022 by means of the 2022 Tax Relief Act (Steuerentlastungsgesetz). However, the labour market, which plays a key role in determining revenues from this tax, continued to do well despite the difficult economic situation (see the article [in German only] on economic trends in the current issue of the Finance Ministry’s monthly report). Child benefit payments – which are financed from wages tax receipts – rose by 1.0% on the year. On balance, cash receipts from wages tax fell by 53.7% on the year in September 2022. Thanks to the strong upwards trend seen in the first half of the year, cumulative cash receipts from wages tax were up by 2.9% on the year in the January–September 2022 period.

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Corporation tax

Gross receipts from corporation tax were up by 20.7% in September (a month when prepayments are due). Prepayments for the current year recorded similarly strong growth in year-on-year terms as they did in the two other months this year when prepayments were due. Research and investment allowance payments, which are financed from corporation tax receipts, totalled about €16.9m and thus had only a marginal impact on the yield from corporation tax. On balance, cash receipts from corporation tax were up by 20.5% on the year in September 2022. Cumulatively, cash receipts from corporation tax rose by 14.6% on the year in the first nine months of 2022.

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Assessed income tax

As in the case of corporation tax, September is a month when prepayments of assessed income tax are due. Overall, receipts from this tax declined by 1.1% on the year in September. Prepayments for the current year experienced weaker year-on-year growth than in the two other months this year when prepayments were due. The disbursement of the energy price allowance in September 2022 also contributed to the lower prepayments. Refunds to employees, which are financed from this revenue, fell by 26.7% on the year. Investment allowance payments, research allowance payments and owner-occupied homes premiums, which are insignificant in terms of amount, were also deducted from the gross figure. On balance, cash receipts from assessed income tax fell by 0.1% on the year in September 2022. Cumulatively, receipts from assessed income tax rose by 11.1% on the year in the first nine months of 2022.

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Non-assessed taxes on earnings

Gross receipts from non-assessed taxes on earnings were down by 15.6% on the year in September 2022. The tax revenue in this category is strongly influenced by receipts from capital income taxes in connection with dividend distributions by corporations. Shifts in dividend distribution dates frequently occur throughout the year. September is not a month when revenue from non-assessed taxes on earnings tends to be high. In such months, strong fluctuations in year-on-year revenue figures can occur, which should not be interpreted as indications of future trends. Refunds by the Federal Central Tax Office, which are financed from gross revenue, totalled about €52m (up by 19.9% on the year). Overall, cash receipts from non-assessed taxes on earnings fell by 16.6% on the year in September 2022. In cumulative terms, cash receipts from non-assessed taxes on earnings rose by 34.2% on the year in the first nine months of 2022.

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Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains was down by 45.5% on the year in September 2022 and down by 26.9% on the year in the January–September 2022 period. It is fair to assume that the January–September 2021 baseline featured high capital gains generated through sales of shares, given the high share prices at the time.

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Value added taxes

Revenue from value added taxes was up by 7.4% on the year in September 2022. Receipts from (domestic) VAT rose by 2.5%, while receipts from import VAT were up by 21.2%. The marked growth in receipts from import VAT reflects the substantial year-on-year increase in the value of imported goods, which is mainly due to the very sharp rise in import prices. Because import VAT can be deducted as input tax from (domestic) VAT, rising import VAT receipts tend to result in weaker revenue trends for (domestic) VAT. The yield from value added taxes tends to be subject to strong fluctuations over the course of the year. This has been magnified by a shift that has occurred on several occasions since the beginning of 2021, with some cash receipts from value added taxes not being recorded until the subsequent month.

When analysing the trends over the course of the year to date, it is important to consider the special factors affecting the 2021 baseline. In January 2021, the shift in the deadline for filing returns and paying import VAT resulted in a tax revenue shortfall of almost €5bn. Moreover, receipts from value added taxes in the first months of 2021 were substantially reduced by the Covid pandemic, the measures taken to contain it, and the tax measures adopted in connection with the pandemic. To a significant extent, the strong cumulative year-on-year rise of 16.8% in the January–September 2022 period can be attributed to this weak baseline.

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Taxes accruing to the Federation

In September 2022, revenue from taxes accruing solely to the Federation was down by 10.6% on the year. This is primarily attributable to a sharp 38.3% year-on-year decline in energy duty receipts as a result of the temporary reduction in energy duty for fuel as set out in the Energy Duty Reduction Act, which is reflected in the cash receipts with a two-month time lag. Year-on-year revenue declines were also recorded for motor vehicle tax (down by 6.9%), electricity duty (down by 2.6%) and coffee duty (down by 2.0%). Receipts from the solidarity surcharge climbed by 8.9% on the year, thanks to growth in revenue from the taxes that make up its tax base. Revenue gains were also posted by insurance tax (up by 9.3%), tobacco duty (up by 21.0%) and aviation tax (up by 58.7%). The strong year-on-year increase in receipts from aviation tax is the result of the rebound in aviation activities following very low levels in the previous years due to the pandemic.

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Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder were down by 7.7% on the year in September 2022, mainly as a result of declines in revenues from real property transfer tax (down by 12.6%) and inheritance tax (down by 1.6%). The 1.0% increase in receipts from betting and lottery tax was mainly due to proceeds from the new online poker tax and virtual slots tax, which have been levied since 1 July 2021. Revenue from fire protection tax was up by 8.7% on the year, while receipts from beer duty rose by 12.4%.

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Borrowing and guarantees