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21 November 2023

Overview of federal budgetary and financial data up to and including October 2023

Translated extracts from the Federal Ministry of Finance’s November 2023 monthly report

Federal budget trends up to and including October 2023

Table: Trends in the federal budget

Expenditure (€bn)²

480.7

476.3

371.6

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

 

 

-3.8

Revenue (€bn)³

364.7

389.9

303.4

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

 

 

+7.1

Tax revenue (€bn)

337.2

358.1

281.1

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

 

 

+6.6

Balance of pass-through funds (€bn)

0.0

0.0

0.0

Fiscal balance (€bn)

-116.0

-86.4

‑68.2

Financing/use of surplus:

116.0

86.4

68.2

Cash resources (€bn)

-

-

170.3

Seigniorage (€bn)

0.1

0.2

0.1

Movements in reserves⁴ (€bn)

0.5

40.5

0.0

Net borrowing⁵ (€bn)

115.4

45.6

‑102.2

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 2022

2023 target

Actual¹
January–October 2023

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Revenue

In the period from January to October 2023, federal revenue totalled €303.4bn, up by 7.1% (€20.0bn) on the year. Tax revenue totalled €281.1bn, a gain of 6.6% (€17.5bn) on the year. Further information on tax revenues is provided in the article “Tax revenues and economic environment in October 2023” (in German only) in the current edition of the monthly report.

The category of “other income” recorded an increase of 13.0% (€2.6bn) on the year in the first ten months of 2023. Within this category, interest revenue from the Federation’s cash management system was up by €1.2bn, while income from guarantees increased by €0.9bn. In addition, Germany received €0.6bn in disaster relief from the EU Solidarity Fund to help repair the damage caused by the severe floods in summer 2021.

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Expenditure

In the period from January to October 2023, federal expenditure totalled €371.6bn, down by 3.8% (€14.8bn) on the year. Broken down by economic category, investment spending was up by 26.1% (€7.4bn), while consumption spending was down by 6.2% (€22.1bn) on the year.

The significant rise in investment spending can still be attributed to the €6.3bn loan that was granted to the IMF’s Resilience and Sustainability Trust in January 2023. Even after adjusting for this special effect, however, investment spending was up on the year (by 3.8%, or €1.1bn). A closer look at the figures shows contrasting trends: On the one hand, liquidity assistance provided to the Federal Employment Agency declined by €2.1bn on the year in the first ten months of 2023. In addition, liquidity assistance totalling €1.0bn was disbursed to the long-term care insurance compensation fund in the first ten months of 2022, and this year’s loan to the Poverty Reduction and Growth Trust is €0.7bn less than in 2022. On the other hand, however, “investment grants to other areas” increased by €3.5bn on the year. These grants are distributed among a wide variety of federal budget items: key areas included grants for the operation of floating LNG terminals (up by €0.8bn), grants for investments in the Federation’s Autobahn GmbH (up by €0.6bn) and grants to cover construction costs for maintaining rail infrastructure (up by €0.5bn). In addition, a €1.0bn loan extending beyond the current year was granted to the health fund in August 2023. Fixed asset investment remained basically unchanged year-on-year.

Consumption spending also showed contrasting trends. Due to the general increase in interest rates, interest expenditure rose sharply, by €20.5bn, while ongoing grants and subsidies declined by 16.2% (€45.1bn) on the year, mainly because much less funding had to be made available to combat the adverse effects of the Covid-19 pandemic than in 2022. For example, federal payments to the health fund to cover pandemic-related costs totalled €1.3bn, a decline of €26.5bn on the year. Pandemic-related assistance to businesses totalled €0.5bn, down by €10.0bn on the year. Grants for the centralised procurement of vaccines to fight SARS-CoV-2 fell by €5.4bn on the year, to €0.9bn. Pandemic-related compensation payments under section 21 of the Hospital Financing Act (Krankenhausfinanzierungsgesetz) were down by €4.1bn on the year in the first ten months of 2023. In addition, €5.9bn in federal budget funds were allocated to the Climate and Transformation Fund in 2022, and no such allocation is being made in 2023. The decline in ongoing grants and subsidies was offset somewhat by increases in spending on citizen’s benefit (up by €3.1bn), basic income support for older people (up by €1.8bn) and government housing and heating allowances (also up by €1.8bn). Federal subsidies to the general pension insurance system and the supplementary federal subsidy to the health fund each rose by €1.7bn. In addition, spending on efforts to enhance security, defence and stability in partner countries was up by €2.3bn, mainly in connection with the war in Ukraine.

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Fiscal balance

The federal budget recorded a deficit of €68.2bn for the January–October 2023 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

Tabelle vergrößern

Trends in federal expenditure by economic category

Tabelle vergrößern

Trends in federal revenue

Tabelle vergrößern

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Tax revenue in October 2023

2023 trends in tax revenue (excluding local authority taxes)

Tabelle vergrößern

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Tax revenue trends

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Total tax revenue

Overall tax revenue (excluding local authority taxes) recorded a slight decline of approximately ½% on the year in October 2023 (see the table “2023 trends in tax revenue (excluding local authority taxes)”). This was mainly due to a year-on-year fall of about 2% in receipts from joint taxes. Receipts from wages tax, corporation tax and assessed income tax all declined. By contrast, there was a rise in revenue from capital income tax in particular, as well as a moderate increase in receipts from value added taxes (see further details on the individual taxes below).

Revenue from taxes accruing to the Federation was up by about 12% on the year. As in previous months, this was mainly due to the temporary cut in energy duty rates in the June–August 2022 period, which significantly reduced the 2022 baseline. In the case of energy duty, it generally takes two months for accrued revenue to show up in cash statistics. October was therefore probably the last month in which this baseline effect had a major impact on cash receipts. Other higher-revenue federal taxes that recorded gains include insurance tax, tobacco duty and the solidarity surcharge. Receipts from motor vehicle tax and electricity duty declined.

Revenue from taxes accruing to the Länder was down by slightly less than ½%, meaning that the downwards trend that has persisted since July 2022 has become significantly less pronounced. This was driven by the two highest-yielding Länder taxes, real property transfer tax and inheritance tax. In the case of real property transfer tax, revenue was down by 13%, a relatively small decline compared with previous months this year. However, this had to do with the very low October 2022 baseline. In the case of inheritance tax, receipts increased noticeably in year-on-year terms. It should be noted, however, that strong year-on-year fluctuations are common in the case of inheritance tax, and no conclusions can necessarily be drawn about future trends.

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Apportionment of tax revenue among the different levels of government

The Federation’s take from joint taxes declined by approximately 1%. Because the Federation’s share of VAT revenue increased compared with 2022, the decline was less pronounced than that of total joint tax receipts. Accordingly, the Länder saw a somewhat stronger decline in their take from these taxes, of almost 3%. The changes in the apportionment of VAT revenue are based on the fact that, as stipulated in the Fiscal Equalisation Act (Finanzausgleichsgesetz), the fixed payments transferred to the Länder from the Federation’s share of VAT revenue have declined from 2022 (for details on the current distribution, see the table “Apportionment of VAT revenue in October 2023”). By contrast, federal subsidies to the Länder for public transport, and supplementary federal grants to the Länder, recorded a year-on-year increase in October 2023. Moreover, the Federation had to transfer a significantly higher amount of own resources to the EU than in October 2022. The Federation’s overall tax receipts (after the apportionment of VAT revenue and the subtraction of supplementary federal grants) were down by nearly 1% on the year in October 2023, while Länder tax revenues declined by more than 1%. Local authorities’ take from joint taxes was down by about 5% on the year.

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Apportionment of VAT revenue in October 2023

In October 2023, revenue from value added taxes was distributed as follows among the Federation, Länder and local authorities:

Share of total VAT revenue (€23,790m) as per section 1 of the Fiscal Equalisation Act

52.81398351%

45.19007254%

1.99594395%

€12,565m

€10,751m

€475m

Plus (+) / minus (-):

1/12 of the fixed payments as per section 1 (2) and (2a) of the Fiscal Equalisation Act (€9,659m)

-€805m

+€605m

+€200m

1/5 of the fixed payment as per section 1 (5) of the Fiscal Equalisation Act (€1,884m)

-€377m

 +€377m

Share after accounting for the fixed payments

47.85%

49.32%

2.84%

€11,383m

€11,733m

€675m

Any discrepancies in totals are due to rounding.

 

Federation

Länder

Local authorities

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Further details on specific taxes

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Wages tax

Gross revenue from wages tax was down by about 4½% on the year in October 2023. This relatively strong decline can be attributed to a high baseline, which, in turn, is largely to do with the energy price allowance that was disbursed in September 2022 and financed from wages tax receipts. Employers, who paid out the allowance, were refunded from September 2022 tax receipts, but depending on the date on which the wages were paid, the wages tax due on the allowance was not declared and remitted to the tax authorities until October 2022 in some cases. In addition, the tax relief measures contained in the Inflation Compensation Act (Inflationsausgleichsgesetz) continue to have a dampening effect on both gross revenue (due to the income tax rate adjustment) and cash receipts (due to the child benefit increase). On balance, cash receipts from wages tax declined by approximately 8% on the year in October 2023.

The subdued economic trend has not negatively affected wages tax revenue. According to the most recent figures, employment and the number of jobs subject to social security contributions have remained relatively stable at a high level. Employment figures for September 2023 were slightly more than ½% higher than in the same month of 2022, which can be expected to boost wages tax revenue. For the first time in some time, however, the uptake of short-time work for economic reasons was up in year-on-year terms, which has a dampening effect on wages tax receipts. It can be assumed that wages and salary increases continue to expand the tax base for wages tax, even though a significant part of this can be attributed to the inflation compensation bonus, which is tax-exempt and therefore has no impact on revenues.

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Taxes on earnings

In October, revenue figures for assessed income tax and corporation tax were driven by the revenue administration’s assessment activities for the years up to and including 2022. Revenues from these taxes can fluctuate significantly in year-on-year terms, especially when larger tax cases are involved. Assessments following completed audits also play an important role.

Gross corporation tax receipts totalled about €140m in October 2023 and were thus much lower than in October 2022, when the equivalent figure was just under €600m. In particular, refunds for past periods were noticeably higher than in 2022. Research allowance payments (which were significantly higher than in 2022) and investment allowance payments (which were very low) were financed from gross receipts. On balance, cash receipts totalled €90m, down by 85% on the year.

Cash receipts from assessed income tax were down by 16% on the year. Here, too, refunds were noticeably higher than in 2022. The decline would have been even more pronounced if not for the fact that back payments were also up slightly on the year. The research allowance, investment allowance and owner-occupied homes premium did not have a major impact on revenues.

By contrast, the yield from withholding tax on interest and capital gains increased substantially, by 133% on the year. This is the fifth consecutive month with substantial year-on-year growth. It can be assumed that the increase is attributable not only to volatile capital gains, but to a significant extent to the marked rise in interest rates. Non-assessed taxes on earnings were up by 14% on the year. The increase is similar in magnitude to all the previous increases for 2023 put together, even though October is not normally a high-revenue month for this tax.

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Value added taxes

Revenue from value added taxes was up by 2½% on the year in October 2023. Receipts from import VAT continued to fall noticeably in year-on-year terms, with a decline of more than 21% in October 2023. This contraction is somewhat more pronounced than the overall decline in imports of goods (down by just under 17% on the year in September). By contrast, receipts from (domestic) VAT rose by nearly 15%. One factor here was that the decline in import VAT revenue also led to a year-on-year decline in deductions of input VAT. The fact that the growth in revenue from value added taxes was below the rate of inflation is probably related to the weak trend in private consumption expenditure in the third quarter of 2023 (see above).

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Borrowing and guarantees

Borrowing trends for the Federation in October 2023

Tabelle vergrößern

Borrowing trends for the Federation (budget and special funds, excluding loan financing) in October 2023

Tabelle vergrößern

Guarantees

  

Authorised amount

Amount allocated as of
30 September 2023

Amount allocated as of
30 September 2022

in €bn

Export credit guarantees

150.0

114.6

121.6

Loans to foreign debtors, foreign direct investment, EIB loans

60.0

39.9

36.2

Financial cooperation projects

38.8

33.9

30.7

Food stockpiling

0.7

0.0

0.0

Domestic guarantees

650.0

347.7

302.7

International financial institutions

85.0

75.5

75.5

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 and fiscal data

December 2023 issue

November 2023

21 December 2023

January 2024 issue

December 2023

30 January 2024

February 2024 issue

January 2024

22 February 2024

March 2024 issue

February 2024

21 March 2024

April 2024 issue

March 2024

23 April 2024

May 2024 issue

April 2024

24 May 2024

June 2024 issue

May 2024

20 June 2023

July 2024 issue

June 2024

23 July 2024

August 2024 issue

July 2024

22 August 2024

September 2024 issue

August 2024

20 September 2024

October 2024 issue

September 2024

22 October 2024

November 2024 issue

October 2024

21 November 2024

December 2024 issue

November 2024

20 December 2024

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

7–8 December 2023

Eurogroup and ECOFIN Council meetings in Brussels, Belgium

15–16 January 2024 

 Eurogroup and ECOFIN Council meetings in Brussels, Belgium

22–24 February 2024 

 Eurogroup and ECOFIN Council meetings in Brussels, Belgium

28–29 February 2024 

 Meeting of G20 finance ministers and central bank governors in Rio de Janeiro, Brazil

11–12 March 2024 

 Eurogroup and ECOFIN Council meetings in Brussels, Belgium