Federal budget trends up to and including October 2024

Revenue

Federal revenue (excluding seigniorage, withdrawal from reserves and revenue from loans) totalled €332.1bn for the period from January to October 2024, up by 9.5% (€28.7bn) on the year. Tax revenues were up by 4.7% (€13.1bn) on the year. For further information about tax revenues, please refer to the article “Tax revenues in October 2024” [in German only] in the current issue of the monthly report.

The category of “other revenue” totalled €37.9bn in October 2024, a year-on-year gain of 69.8% (€15.6bn). This included a €4.7bn year-on-year increase in receipts from the distance-based commercial vehicle toll, a gain largely driven by the recent addition of a CO₂ component to the toll. In addition, revenue from sales 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. The liquidation of the Economic Stabilisation Fund for Energy generated receipts totalling €1.9bn. Revenue generated in connection with the Offshore Wind Act (Windenergie-auf-See-Gesetz) totalled €1.3bn. Furthermore, when the special fund for digital infrastructure was dissolved, an amount of €4.1bn was transferred to the core budget, because the funding that is being provided to the Länder for the purpose of implementing the Digital Pact for Schools and expanding broadband networks is now being drawn from the core budget.

Expenditure

In the period from January to October 2024, federal expenditure totalled €371.7bn, roughly unchanged compared with the same period last year (up by €0.1bn). Broken down by economic category, investment spending was down by 5.8% (€2.1bn) on the year, while consumption spending posted a slight increase (up by 0.7% or €2.2bn on the year).

In the area of consumption spending, ongoing grants and subsidies recorded a year-on-year increase of 2.4% (€5.6bn). Human resources expenditure was up by 5.7% (€1.9bn) on the year. In contrast, interest expenditure declined by 11.5% (€4.1bn) on the year, while operating expenditure fell by 3.7% (€1.1bn). The increase in ongoing grants and subsidies was the result of contrasting trends: spending on citizen’s benefit was up by €2.9bn, and the federal subsidy to the general pension insurance system rose by €2.0bn on the year. Spending on efforts to enhance security, defence and stability in partner countries was €1.3bn higher than in the first ten months of 2023. 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 €1.1bn. In contrast, federal payments to the health fund to cover pandemic-related costs declined by €1.3bn on the year. Furthermore, no money was budgeted in 2024 for a supplementary federal subsidy to the health fund or for federal lump-sum contributions to the long-term care insurance system. This led to year-on-year spending reductions of €1.7bn and €1.0bn, respectively, in the period from January to October 2024.

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 14.4% (€4.2bn) 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 the first ten months of 2023.

Fiscal balance

The federal budget recorded a deficit of €39.7bn for the January–October 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 October 2024

Tax revenue trends

Total tax revenue

Total tax revenue (excluding local authority taxes) was up by approximately 8% on the year in October 2024 (see the table “2024 trends in tax revenue (excluding local authority taxes)”).

Receipts from joint taxes, which account for the largest share of tax revenue, also grew by roughly 8%. Every joint tax except for non-assessed taxes on earnings posted revenue growth in October (see further details on specific taxes below). The rate of revenue growth – for total tax revenue as well as for joint taxes – was significantly higher in October than during the earlier course of the year. In cumulative terms, both total tax revenue and joint tax revenue were up by just over 3% on the year in the first ten months of 2024.

Revenue from taxes accruing solely to the Federation was up by about 6% on the year in October. However, this increase was due in large part to an accounting effect in connection with tobacco duty (some revenue from September was not recorded in the accounts until October). Other high-revenue federal taxes that posted gains included insurance tax, motor vehicle tax and and the solidarity surcharge. In contrast, energy duty receipts were down slightly on the year in October, while the yield from electricity duty posted a sharp decline due to tax relief measures under the government’s electricity price package. In cumulative terms, revenue from taxes accruing to the Federation was up by roughly 3½% on the year in the first ten months of 2024. Approximately two-thirds of this cumulative increase is attributable to revenue from the EU energy crisis contribution, which is being levied for the first time in 2024.

Länder taxes posted even higher revenue growth than federal taxes in October 2024, rising by over 14% on the year. This increase was driven in large part by revenue from real property transfer tax, which was up on the year by nearly 22%. Receipts from this tax remain stable at roughly €1.1bn per month, and the high growth rate reflects the lower baseline figure from last year. In addition, the yield from inheritance tax – the other high-revenue Länder tax – was up sharply on the year by nearly 16% in October. Volatility in year-on-year figures for this tax is generally the rule and not an exception. Taken cumulatively, revenue from taxes accruing to the Länder increased by roughly 4½% on the year in the first ten months of 2024.

Apportionment of tax revenue among the different levels of government

The Federation’s tax receipts (after accounting for supplementary federal grants) were up by just over 11% on the year in October 2024. This outcome was driven not only by tax revenue growth but also – and primarily – by a €400m year-on-year decline in transfers of own resources to the EU, which are financed from the Federation’s tax revenues. Supplementary federal grants to the Länder were also markedly lower on the year. However, the decline in supplementary grants was partially offset by an increase in federal public transport subsidies to the Länder. The Federation’s take from joint taxes increased at a slightly lower rate than overall revenue from joint taxes. This is due to the fact that the Federation’s share of VAT revenue in October 2024 was slightly lower than in October 2023, after taking into account the fixed payments that are transferred from the Federation’s share of VAT revenue to the Länder and local authorities in accordance with the Fiscal Equalisation Act (see the table “Apportionment of VAT revenue in October 2024” below).

Länder tax receipts (after accounting for supplementary federal grants) were up by roughly 7½% on the year. This was lower than the growth rate posted by the Federation due to the decline in (a) the Federation’s transfers of own resources to the EU and (b) supplementary federal grants to the Länder. In contrast, the share of joint tax revenue that was allocated to the Länder increased at a slightly faster pace than the Federation’s share in October, due to changes in the vertical distribution of VAT revenue described above. Local authorities’ take from their share of joint taxes was up by approximately 10% on the year in October 2024.

Apportionment of VAT revenue in October 2024

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

Further details on specific taxes

Wages tax

Net revenue from wages tax was up by nearly 6% on the year in October 2024. Gross receipts were up by just under 5%, and child benefit payments remained basically unchanged on the year (at the same benefit rates). The rise in gross wages tax revenue is likely driven in large part by appreciable increases in nominal wages, with payments of tax-exempt inflation compensation bonuses now playing only a minimal role. Stimuli from the labour market (in terms of numbers of employed persons) have weakened significantly and are now having at best a neutral impact on wages tax receipts. Employment figures weakened in the most recent reporting period and show little growth over the previous October. Short-time work levels were higher on the year in October, which had a negative impact on year-on-year wages tax revenue figures.

Assessed income tax and corporation tax

Trends in revenue from assessed income tax and corporation tax in October 2024 were driven largely by revenue administration assessments for previous periods. In the case of assessed income tax, employee tax assessments for 2023 are a particularly important factor. Refunds of assessed income tax for past assessment periods remained roughly unchanged on the year (not just for employees), while back-payments for past assessment periods and (retroactive) prepayments both increased. This resulted in a 64% year-on-year surge in cash receipts in October. However, few conclusions can be drawn from this figure given the highly volatile results of assessment activities. This volatility can be caused, for example, by fluctuations in (a) the submission of tax returns, (b) case processing by the revenue administration and (c) the size of individual cases. Research allowance payments financed from assessed income tax receipts were nearly twice as high as in October 2023. Due to their small volume, however, they had only a negligible impact on net results.

In the case of corporation tax, refunds for past assessment periods and back-payments were appreciably higher on the year in October 2024, while (retroactive) prepayments declined slightly. On balance, net corporation tax receipts were up by nearly €700m on the year in October. Research allowance payments financed from corporation tax revenue were up by about €20m on the year in October. Year-on-year figures for corporation tax receipts are also subject to a high level of volatility resulting from variations in assessment activities. Prepayments of corporation tax in 2024 are down slightly on the year and negative on balance. This suggests that revenue trends are being weighed down by the weak economy, because the negative balance of corporation tax prepayments can be assumed to mean that prepayments for 2024 have been reduced on a large scale.

Capital income taxes

Receipts from withholding tax on interest and capital gains posted another strong gain in October, growing by nearly 82% on the year. At the same time, the growth rates for this tax have abated somewhat compared with the first half of 2024, because the sharp rise in interest rates on (short-term) deposits is now showing up in last year’s baseline figures. In light of current trends in revenue and interest rates, growth rates are expected to continue to shrink in the coming months, but revenue is not expected to decline appreciably. Revenue from non-assessed taxes on earnings, which is largely derived from the taxation of dividend income, was down by just under 5% on the year in October. October is generally a low-revenue month for this tax and therefore tends to have a relatively weak impact on annual results.

Value added taxes

Revenue from value added taxes was up by about 2½% on the year in October 2024. This is line with the current moderate upward trend in nominal private consumption. Current retail data suggests that VAT revenue is likely to gain upward momentum in the coming months. Nominal retail sales were up by 4% on the year in September, reflecting a real growth rate of a similar magnitude. Revenue from import VAT remained basically unchanged on the year in October. This was in line with available data on nominal imports, which grew only slightly by about 1% on the year in September (adjusted for working days and seasonal factors). Revenue from domestic VAT was up by about 3½% on the year in October.

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Borrowing and guarantees

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Calendar