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22 November 2022

Overview of federal budgetary and financial data up to and including October 2022

Translated extracts from the Federal Ministry of Finance’s November 2022 monthly report

Table: Trends in the federal budget
Actual 20212022 targetActual¹
January to October 2022

Expenditure (€bn)²

556.6495.8386.4

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

  -3.7

Revenue (€bn)³

341.0356.2283.3

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

  11.0

Tax revenue (€bn)

313.5328.4263.6

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

  11.4

Balance of pass-through funds (€bn)

0.00.00.0

Fiscal balance (€bn)

-215.6-139.6-103.0

Financing/use of surplus:

215.6139.6103.0

Cash resources (€bn)

--169.7

Seigniorage (€bn)

0.20.20.1

Movements in reserves⁴ (€bn)

0.00.50.5

Net borrowing⁵ (€bn)

215.4138.9-67.2

Revenue

Federal revenue for the period from January to October 2022 totalled approximately €283.3bn, up by 11.0% (about €28.1bn) on the year. Tax receipts (including EU own resources that are subtracted from the total) increased by 11.4% (about €27.0bn) on the year. Revenue from value added taxes rose by 22.0% (about €20.3bn), while receipts from income tax and corporation tax grew by 10.1% (about €12.0bn). Energy duty receipts were down by 10.2% (about €2.6bn) on the year in the first 10 months of 2022 due to the reduction in energy duty rates on fuels from June to August 2022 (as set out in the Energy Duty Reduction Act (Energiesteuersenkungsgesetz)). Federal revenue totals were also adversely impacted by a major increase in public transport subsidies to the Länder. These subsidies, which grew by roughly €4.1bn on the year, include additional funding to offset revenue losses in the public transport sector due to (a) the effects of the Covid-19 pandemic (€1.2bn) and (b) the costs of the temporary 9-euro public transport ticket scheme (€2.5bn).

The category of “other revenue” recorded a gain of 5.8% (about €1.1bn) on the year in the January–October period.

Expenditure

Federal expenditure in the first 10 months of 2022 totalled approximately €386.4bn, down by 3.7% (about €15.0bn) on the year. A breakdown by economic category shows that consumption spending remained roughly constant year-on-year (up by 0.3% or about €1.0bn). There were several contrasting trends overall. For example, ongoing subsidies to social security funds were up by 9.0% or about €12.5bn on the year, which increased spending levels. This includes higher federal payments (totalling roughly €12.6bn) 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 €3.1bn on the year in the January–October 2022 period. Operating expenditure was also up by 13.1% (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 10 months of 2022. Due to the general increase in interest rates, interest expenditure grew by about €10.9bn on the year from a relatively low baseline. The main factors that caused expenditure to decline overall on the year were (a) subsidies to companies, which fell by 39.5% (around €23.2bn) and (b) grants to public administrations, which fell by 20.7% (approximately €10.9bn). Subsidies to companies were down sharply mainly due to the decline in pandemic-related assistance to businesses, which amounted to roughly €10.5bn in the first 10 months of 2022 after totalling €33.5bn during the same period in 2021. 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 roughly €28.3bn in the first 10 months of 2022, down by 36.2% (about €16.0bn) on the year. This decline was mainly due to a reduction in the liquidity assistance provided to the Federal Employment Agency, which was down by roughly €15.3bn on the year in the January–October 2022 period. 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–October period remained roughly constant on the year.

Fiscal balance

The federal budget recorded a deficit of approximately €103.0bn for the January–October 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.

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 October 2022

2022 trends in tax revenue (excluding local authority taxes)

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Total tax revenue (excluding local authority taxes) was up by 6.1% on the year in October 2022. Revenue from joint taxes was up by 9.7%, mainly due to the sharp increase in receipts from wages tax and import VAT. Revenue from taxes accruing solely to the Federation fell by 8.0%. This is mainly due to the cut in energy duty rates set out in the Energy Duty Reduction Act for the June–August 2022 period, which resulted in substantially lower energy duty receipts in the three months from August to October. Receipts from taxes accruing to the Länder were down by 21.2%, largely due to declines in revenue from real property transfer tax and inheritance tax, the two highest-yielding Länder taxes.

EU own resources

Transfers of own resources to the EU (including customs duties) were down on the year by 27.9% in the month of October 2022 and by 2.8% in the first 10 months of the year. 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.

Overview of the January–October 2022 period

In cumulative terms, total tax revenue (excluding local authority taxes) grew markedly by 9.3% in the first 10 months of 2022. 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-19 pandemic and by the statutory and administrative tax measures that were taken in response. In the first half of 2022 alone, total tax revenue (excluding local authority taxes) was up by 17.5% on the year.

The notable growth in tax revenue so far this year is due to the sharp increase in receipts from joint taxes, which were up by 11.0% on the year. In contrast, revenue from taxes whose revenue goes either specifically to the Federation or specifically to the Länder posted only minor changes of –0.8% and +0.6% respectively.

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 17.1% on the year in October 2022. This increase was driven mainly by higher revenue from joint taxes, which grew by 15.6% on the year thanks not only to (a) a 9.7% year-on-year jump in overall revenue from joint taxes in October but also to (b) a decline in the fixed amounts of VAT revenue that are paid to the Länder as part of the fiscal equalisation system. These fixed amounts were very high in October 2021 due to compensation payments made to the Länder in order to offset revenue losses resulting from tax measures that were adopted to mitigate the effects of the Covid-19 pandemic. In addition, transfers of EU own resources from the federal budget were sharply down on the year, which likewise boosted the Federation’s year-on-year revenue figures. In contrast, a substantial drop in receipts from purely federal taxes, which were down by 8.0% on the year, had a negative impact on the Federation’s revenue totals. Furthermore, the supplementary grants and public transport subsidies that the Federation pays to the Länder were slightly higher on the year in October.

Länder tax receipts (after accounting for supplementary federal grants) climbed by 2.9% on the year in October 2022. Revenue from taxes accruing solely to the Länder was down by 21.2%, but this decline was more than offset by higher receipts from joint taxes. Compared with the Federation, however, the Länder rate of increase in revenue from joint taxes was much lower at 5.6%, due to the lower fixed payments of VAT revenue mentioned above. Local authorities’ take from their share of joint taxes was up by 2.9% on the year.

Joint taxes

Wages tax

Gross revenue from wages tax posted a notable year-on-year gain of 10.7% in October 2022. 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 0.4% on the year. On balance, cash receipts from wages tax were up by 13.0% on the year in October. Thanks to the strong upwards trend in the first half of the year, cumulative cash receipts from wages tax were up by 3.9% on the year in the January–October 2022 period, despite the revenue-reducing impact of the energy price allowance paid out to employees in September.

Corporation tax

Gross corporation tax revenue amounted to approximately €0.6bn in October 2022, up from the total of −€0.2bn (reimbursements exceeding payments) recorded in October 2021. Corporation tax receipts in October 2022 were determined by assessments for previous years. The balance between back-payments and refunds improved considerably in year-on-year terms. Nevertheless, monthly results are influenced by various factors such as tax return submission dates, the conclusion of audits, etc., and are therefore subject to significant fluctuations over the course of the year. Research and investment allowance payments, which are financed from corporation tax receipts, totalled about €6.0m and thus had only a marginal impact on the yield from corporation tax. On balance, cash receipts from corporation tax totalled approximately €0.6bn in October 2022. Cumulatively, cash receipts from corporation tax rose by 17.3% on the year in the first 10 months of 2022.

Assessed income tax

Gross receipts from assessed income tax were down by 2.1% on the year in October. As is the case with corporation tax, assessment activity is the factor that determines revenue figures for assessed income tax in the month of October. Refunds to employees, which are financed from this revenue, increased by 6.6% on the year. Investment allowance payments, research allowance payments and owner-occupied homes premiums, which are insignificant in terms of amount, are also deducted from the gross figure. On balance, cash receipts from assessed income tax fell by 7.9% on the year in October 2022. Cumulatively, receipts from assessed income tax were up by 10.6% on the year in the first 10 months of 2022.

Non-assessed taxes on earnings

Gross receipts from non-assessed taxes on earnings were down by 19.0% on the year in October 2022. Revenue in this category mainly comes from capital income tax that is imposed on dividend distributions by corporations. Shifts in dividend distribution dates frequently occur throughout the year. October 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 figures can occur, which should not necessarily be interpreted as trends. Refunds by the Federal Central Tax Office, which are financed from gross revenue, totalled about €24m (down by 64.6% on the year). Overall, cash receipts from non-assessed taxes on earnings fell by 16.9% on the year in October 2022. In cumulative terms, cash receipts from non-assessed taxes on earnings were up by 30.6% on the year in the first 10 months of 2022.

Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains was down on the year by 48.3% in October 2022 and by 28.9% in the first 10 months of the year. It is fair to assume that the January–October 2021 baseline reflected high levels of capital gains generated through sales of shares, given the high share prices at the time.

Value added taxes

Revenue from value added taxes was up by 8.3% on the year in October 2022. Receipts from domestic VAT fell slightly by 0.2%, while the yield from import VAT surged by 30.2%. The strong 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 revenue shifts that have 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 (detailed explanations are provided [in German only] in the October 2022 issue of the Finance Ministry’s monthly report). To a significant extent, the strong cumulative year-on-year rise of 15.9% in the January–October 2022 period can be attributed to this weak baseline.

Taxes accruing to the Federation

In October 2022, revenue from taxes accruing solely to the Federation was down by 8.0% on the year. This was largely due to a sharp decline in energy duty receipts (down by 26.9% on the year) caused by the temporary reduction in energy duty on fuels, as set out in the Energy Duty Reduction Act. There is a two-month time lag before this tax cut is reflected in cash receipts. Yields from alcohol duty and coffee duty also fell on the year, by 3.6% and 1.4% respectively. Receipts from the solidarity surcharge climbed by 14.9% 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 5.8%), tobacco duty (up by 7.4%), motor vehicle tax (up by 7.0%) and aviation tax (up by 66.8%). 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.

Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder were down by 21.2% on the year in October 2022, mainly due to declines in revenue from real property transfer tax (down by 26.0%) and inheritance tax (down by 14.7%). Betting and lottery tax revenue was down by 21.2% on the year while fire protection tax and beer duty recorded gains of 12.8% and 5.5% respectively.

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Borrowing and guarantees

Borrowing trends for the Federation in October 2022

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Borrowing trends for the Federation (budget and special funds, excluding loan financing) in October 2022

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Borrowing trends for the Federation (loan financing) in October 2022

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Guarantees
  Authorised amountAmount allocated as of
30 September 2022
Amount allocated as of
30 September 2021
in €bn

Export credit guarantees

150.0121.6126.9

Loans to foreign debtors, foreign direct investment, EIB loans

60.036.235.7

Financial cooperation projects

37.030.731.9

Food stockpiling

0.70.00.0

Domestic guarantees

550.0302.7312.3

International financial institutions

90.075.568.6

Treuhandanstalt successor organisations

1.01.01.0

Interest compensation guarantees

15.015.015.0

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Calendar

Publication schedule¹ of the monthly reports
Monthly reportReporting periodPublication date
December 2022 issueNovember 202222 December 2022
January 2023 issueDecember 202227 January 2023
February 2023 issueJanuary 202321 February 2023
March 2023 issueFebruary 202321 March 2023
April 2023 issueMarch 202321 April 2023
May 2023 issueApril 202319 May 2023
June 2023 issueMay 202322 June 2023
July 2023 issueJune 202320 July 2023
August 2023 issueJuly 202324 August 2023
September 2023 issueAugust 202321 September 2023
October 2023 issueSeptember 202320 October 2023
November 2023 issueOctober 202321 November 2023
December 2023 issueNovember 202321 December 2023
Key dates on the fiscal and economic policy agenda

5–6 December 2022

Eurogroup and ECOFIN Council meetings in Brussels, Belgium

16–17 January 2023

Eurogroup and ECOFIN Council meetings in Brussels, Belgium

13–14 February 2023

Eurogroup and ECOFIN Council meetings in Brussels, Belgium

23–24 February 2023

Meeting of G20 finance ministers and central bank governors in Bangalore, India