Federal budget trends up to and including August 2024

Revenue

Federal revenue (excluding seigniorage, withdrawal from reserves and revenue from loans) totalled €259.6bn for the period from January to August 2024, a year-on-year increase of 6.8% (€16.6bn). Tax revenues were up by 3.6% (€8.2bn) on the year. For further information about tax revenues, please refer to the article “Tax revenues in August 2024” [in German only] in the current issue of the monthly report.

The category of “other revenue” totalled €26.8bn in August 2024, a year-on-year gain of 46.0% (€8.4bn). Within this category, revenue from the sale of holdings and from the liquidation of other capital assets belonging to the Federation rose by €3.5bn compared with the same period last year. Receipts from the distance-based commercial vehicle toll increased by €3.4bn on the year, mainly due to Germany’s recent addition of a CO2 component to the toll. Revenue generated in connection with the Offshore Wind Act (Windenergie-auf-See-Gesetz) totalled €1.3bn in August 2024.

Expenditure

In the period from January to August 2024, federal expenditure stood at €299.6bn, roughly unchanged from the same period of 2023 (down by 0.8%, or €2.3bn). Broken down by economic category, consumption spending recorded a slight rise of 0.2% (€0.6bn), while investment spending was down by 10.2% (€3.0bn) on the year.

The uptick in consumption spending can be attributed to a 2.5% (€4.6bn) increase in ongoing grants and subsidies and a 6.0% (€1.6bn) rise in personnel expenditure. In contrast, interest expenditure declined by 12.1% (€4.0bn) on the year. Operating expenditure was down by 6.4% (€1.6bn). The rise in ongoing grants and subsidies was the result of contrasting trends: spending on citizen’s benefit was up by €2.4bn, and the federal subsidy to the general pension insurance system rose by €1.6bn on the year. Federal grants to reimburse the Länder for social spending on basic income support for older people and for people with reduced earning capacity climbed by €0.9bn. Spending on efforts to enhance security, defence and stability in partner countries was €0.8bn higher than in the first eight months of 2023. In contrast, federal payments to the health fund to cover pandemic-related costs declined by €1.3bn on the year. In addition, no money was budgeted this year for a supplementary federal subsidy to the health fund or for federal lump-sum contributions to the long-term care insurance system. In the January–August 2024 period, this led to year-on-year reductions in federal spending of €1.3bn and €1.0bn respectively.

As in previous months, the decline in investment spending was mainly attributable to a special factor in 2023: a €6.3bn loan that was granted to the IMF’s Resilience and Sustainability Trust in January 2023 was recorded as an investment item, as required under budget law. No such loan was made in 2024. After adjusting for this effect, investment spending was up by 14.8% (€3.4bn) on the year. This increase was mainly due to an allocation of €3.0bn to increase the equity of Deutsche Bahn AG. A total of €5.5bn is earmarked for this purpose in the 2024 federal budget. Additionally, investment grants to Autobahn GmbH des Bundes were €0.8bn higher than in January–August 2023.

Fiscal balance

The federal budget recorded a deficit of €40.0bn for the January–August 2024 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 this 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 August 2024

Tax revenue trends

Total tax revenue

Overall tax revenue (excluding local authority taxes) was up by more than 5% on the year in August 2024 (see the table “2024 trends in tax revenue (excluding local authority taxes)”).

Joint taxes, which account for the largest share of tax revenue, posted a slight year-on-year gain of more than 3%. Revenue increases were also recorded for withholding tax on interest and capital gains, assessed income tax and wages tax. In contrast, receipts from non-assessed taxes on earnings, corporation tax and value added taxes declined in year-on-year terms. Over the January–August 2024 period, the cumulative yield from joint taxes increased by approximately 2% on the year.

Taxes accruing solely to the Federation recorded strong revenue gains of nearly 18%. This is primarily attributable to substantial yields from the EU energy crisis contribution. There was no corresponding revenue in 2023: the energy crisis contribution is levied only for 2022 and 2023, and revenue for 2022 accrued in August 2024, in line with the statutory deadlines.¹ Without the energy crisis contribution, receipts from taxes accruing to the Federation would have recorded a moderate decline, because revenue gains from the solidarity surcharge, tobacco duty, insurance tax and motor vehicle tax were insufficient to fully compensate for declines in receipts from energy duty and electricity duty (resulting from the electricity price package). After factoring out the energy crisis contribution, the increase in total tax revenue (excluding local authority taxes) was just over 2%, which is in line with the average growth rate recorded for the year to date.

Receipts from taxes that accrue exclusively to the Länder were up by nearly 8% on the year in August 2024. Revenue from real property transfer tax remained roughly at last year’s level and thus continued to stabilise. Receipts from inheritance tax, which tend to be volatile, climbed by roughly 19% on the year.

Apportionment of tax revenue among the different levels of government

The Federation’s tax receipts (after accounting for supplementary federal grants) rose by approximately 6½% on the year in August 2024. This can be attributed in part to the increase in receipts from purely federal taxes, which in turn was a result of the energy crisis contribution. In contrast, the Federation’s take from joint taxes rose by less than 2%. This is lower than the total growth in receipts from joint taxes, partly because the fixed payments that are deducted from the Federation’s share of VAT revenue were somewhat higher than in 2023 (see the table “Apportionment of VAT revenue in August 2024” below). In accordance with the Fiscal Equalisation Act (Finanzausgleichsgesetz), these fixed payments are transferred from the Federation’s share of VAT revenue to the Länder and local authorities. August 2024 was the first month in which the effects of the Act Amending the Fiscal Equalisation Act and the Stability Council Act (Gesetz zur Änderung des Finanzausgleichsgesetzes und zur Änderung des Stabilitätsratsgesetzes) were felt. Under this law, the Federation is transferring additional VAT revenue amounting to €300m per month to the Länder in the period from August to December 2024. Payments of public transport subsidies from the Federation to the Länder were also higher than in 2023, while transfers of own resources to the EU remained roughly unchanged.

Länder tax receipts (after accounting for supplementary federal grants) increased by more than 4% on the year in August 2024. The Länder took in 3½% more from joint taxes than they did last year, a greater increase than that of the Federation. Local authorities’ take from their share of joint taxes was up by approximately 11% on the year in August 2024.

Apportionment of VAT revenue in August 2024

In August 2024, revenue from value added taxes was distributed as follows among the Federation, Länder and local authorities:

Further details on specific taxes

Wages tax

Receipts from wages tax rose by about 7½% in August 2024, the most pronounced increase seen this year to date. This is a result of an uptick of slightly more than 5% in gross wages tax revenue, driven primarily by wage trends. According to the most recent figures from the Federal Statistical Office, nominal wages saw a substantial year-on-year rise of approximately 5½% in the second quarter of 2024. Moreover, it can be assumed that this growth is no longer attributable to (tax-exempt) inflation compensation bonuses, but rather to regular wage increases. In contrast, the labour market is becoming a less important driver: the upwards trend in employment has stopped, and short-time work remains higher than in 2023. Child benefit payments, which are financed from wages tax receipts, remained almost constant on the year due to unchanged benefit rates.

Assessed income tax and corporation tax

Trends in revenue from assessed income tax and corporation tax in August 2024 were driven largely by the revenue administration’s assessments for previous periods. In the case of assessed income tax, employee tax assessments for 2023 are particularly important. On balance, receipts from this tax were up on the year (by approximately €750m). As in many previous months, back-payments and refunds (including to employees) were higher than in 2023. However, retroactive prepayments for previous years were also up significantly in August 2024, which explains the overall increase in revenue. Research allowance payments financed from assessed income tax receipts remained significantly above 2023 levels, but their volume is so small as to have a negligible impact on net results. In the case of corporation tax, back-payments resulting from assessments were down on the year, while refunds remained roughly unchanged and retroactive prepayments increased. On balance, receipts from this tax declined by approximately €400m on the year. A contributing factor, albeit to a limited extent, was the increase of about 42% (€65m) in research allowance payments financed from corporation tax receipts. In the case of both assessed income tax and corporation tax, September figures will be illuminating, as the third instalment of prepayments is due in September.

Capital income taxes

Revenue from final withholding tax on interest and capital gains has stabilised at around €1.4bn in recent months, a trend that continued in August 2024. This represents a year-on-year increase of 102%. Receipts from non-assessed taxes on earnings dropped by approximately 17½%, a somewhat more marked decline than that seen so far this year on a cumulative basis. However, the timing of dividend payments by large corporations can result in considerable year-on-year revenue fluctuations for this tax (see also the August 2024 edition of the monthly report).

Value added taxes

Receipts from value added taxes were down by more than 2% on the year in August 2024. Import VAT declined by more than 10%. However, according to the most recent figures from the Federal Statistical Office, nominal goods imports increased noticeably again in July 2024 and have almost returned to 2023 levels. This could give import VAT revenue a boost next month – there is normally a two-month lag between the time of import and the posting of cash receipts to government accounts.

Revenue from (domestic) VAT was up by about ½% on the year in August 2024. The low revenue growth is partly due to the fact that real private consumption remains weak. In the second quarter of 2024, it remained at the same level as in 2023. As a result, rises in nominal private consumption (which are the relevant metric for tax revenue) are driven solely by price increases. These in turn are significantly more moderate than in 2023 and 2022.

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Borrowing and guarantees

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