Federal budget trends up to and including April 2025

The budget preparation process for 2025 could not be completed by the end of the previous year in the manner stipulated by Article 110 (2) of the Basic Law (Grundgesetz). Until the 2025 Budget Act has been adopted by the German Bundestag and promulgated in the Federal Law Gazette, the German government is therefore working on the basis of an interim budget, based primarily on Article 111 of the Basic Law (see the article on interim budget management in 2025 [“Vorläufige Haushaltsführung 2025”, available in German only] in the December 2024 issue of the monthly report). Given that the targets for the 2025 federal budget have not been determined, no target values are included in the following tables.

Revenue

Federal revenue (excluding seigniorage, withdrawals from reserves and revenue from loans) in the period from January to April 2025 totalled €136.0bn, a year-on-year increase of 8.7% (€10.8bn). Tax revenue totalled €122.5bn, up by 9.3% (€10.5bn) on the year. For further information about tax revenues, please refer to the article “Tax revenues in April 2025” [in German only] in the current issue of the monthly report.

Receipts in the category of “other revenue” totalled €13.5bn in the first four months of 2025, a year-on-year gain of 2.8% (€0.4bn). Among the various types of “other revenue”, administrative revenue was up by €3.2bn on the year, mainly due to a €2.5bn increase in revenue from the liquidation of the Economic Stabilisation Fund for Energy. In contrast, revenue from the sale of holdings was down by €1.7bn on the year.

Expenditure

In the period from January to April 2025, federal expenditure totalled €159.5bn, up by 6.6% (€9.9bn) on the year. Broken down by economic category, investment spending increased by 55.7% (€5.1bn) on the year, while consumption spending rose by 3.5% (€4.9bn).

In the latter category, ongoing grants and subsidies posted particularly strong year-on-year growth of 7.9% (€7.9bn). This increase can be attributed primarily to the fact that spending on financial support provided under the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz, or EEG Act) was integrated into the core budget on 1 January 2025. Previously, EEG surcharge payments were recorded under the Climate and Transformation Fund. Approximately €3.4bn was spent for this purpose in the first four months of 2025. In addition, the federal subsidy to the general pension insurance system rose by €1.3bn. Federal grants to reimburse the Länder for social spending on basic income support for older people and for people with reduced earning capacity increased by €1.3bn on the year. By contrast, interest expenditure declined by 27.3% (€3.9bn) on the year. This is partly due to changes in the accounting method: Since the beginning of 2025, interest expenditure has been recorded on an accrual basis. This has resulted in lower federal spending, because planned discounts are now distributed across the entire maturity period, thus significantly reducing the necessary fluctuation buffer for interest expenditure.

The increase in investment expenditure was driven mainly by higher spending on financial assistance (up by 62.3% or €4.9bn), including an allocation of €4.3bn to increase the equity of Deutsche Bahn AG. Fixed asset investment posted a year-on-year rise of 12.1% (€0.1bn).

Fiscal balance

The federal budget recorded a deficit of €23.5bn for the January–April 2025 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. This is especially true at the start of the year, and even more so in 2025 due to the interim budget.

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Tax revenue in April 2025

Tax revenue trends

Total tax revenue

Total tax revenue (excluding local authority taxes) posted a substantial year-on-year gain of about 10% in April 2025 (see the table “2025 trends in tax revenue (excluding local authority taxes)”). This increase was largely driven by a one-off effect in connection with Länder taxes (see below). Receipts from joint taxes, which account for the largest share of overall tax revenue, grew at a more moderate pace of about 4%. Withholding tax on interest and capital gains continues to record sharp increases in revenue. Receipts from wages tax and corporation tax were up slightly on the year in April 2025. The yield from value added taxes and assessed income tax remained basically unchanged on the year in April. Non-assessed taxes on earnings recorded a slight decline in revenue (see “Further details on specific taxes” below).

Revenue from taxes accruing solely to the Federation was up by nearly 5% on the year in April; this was likewise a slower rate than growth in overall tax receipts. High-revenue federal taxes that posted gains in April included tobacco duty, the solidarity surcharge and insurance tax. In contrast, receipts from energy duty, motor vehicle tax and electricity duty were down compared with April 2024.

Revenue from taxes accruing solely to the Länder recorded an extremely high year-on-year increase of over 191% in April. This was due largely to a one-off effect in connection with inheritance tax, which was up by nearly 500% on the year in April. The yield from real property transfer tax, which is the other high-revenue Länder tax, up was by 25% on the year.

Apportionment of tax revenue among the different levels of government

The Federation’s tax receipts (after accounting for supplementary federal grants) were up by roughly 2½% on the year in April 2025. Growth in revenue from joint taxes and federal taxes was offset to some degree by (a) a decline in receipts from the apportionment of trade tax revenue from local authorities and (b) an increase in transfers of own resources to the EU, which are financed from the Federation’s tax receipts. In addition, payments of public transport subsidies and supplementary federal grants to the Länder were up slightly on the year in April. The Federation’s take from value added taxes increased on the year in April despite a slight decline in overall revenue from these taxes. This was because the fixed payments that are transferred from the Federation’s share of VAT revenue to the Länder in accordance with the Fiscal Equalisation Act were slightly lower on the year in April (see the table “Apportionment of VAT revenue in April 2025”). In contrast, the 16% year-on-year increase in Länder tax receipts (after accounting for supplementary federal grants) was due primarily to the exceptionally high growth in revenue from taxes accruing only to the Länder. Local authorities’ take from joint taxes was up by approximately 6% in April, due to the growth in revenue from wages tax and, in particular, final withholding tax on interest and capital gains.

Apportionment of VAT revenue in April 2025

In April 2025, 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 grew by nearly 4% on the year in April 2025. Gross revenue (before subtracting child benefit) was up by about 3%. This increase was likely driven primarily by wage increases under collective agreements. Because these increases started taking effect in 2024, they are now increasingly reflected in baseline figures. As a result, the growth rates for wages tax revenue are now lower than in previous months. Currently, labour market trends are not driving growth in wages tax receipts (see below). The tax schedule adjustments that were introduced on 1 January 2025 under the Tax Law Development Act (Steuerfortentwicklungsgesetz) to offset bracket creep and exempt the minimum subsistence income from tax had a dampening impact on wages tax revenue in April. Child benefit payments, which are financed from wages tax receipts, were up by roughly 1% on the year in April due to the increase in child benefit rates that took effect at the beginning of 2025.

Taxes on earnings

Revenue trends for assessed income tax and corporation tax in April 2025 were driven largely by the revenue administration’s assessment activities. This can lead to greater volatility in year-on-year figures, for example as a result of larger assessment cases as well as fluctuations in the number of (a) tax returns submitted and (b) cases processed by the revenue administration.

Receipts from assessed income tax totalled approximately –€0.3bn and remained basically unchanged in year-on-year terms. Back payments and refunds for past periods were slightly higher on the year in April, as were retroactive prepayments. Research allowance payments financed from income tax receipts rose substantially on the year, totalling just under €6m.

Corporation tax receipts amounted to €0.2bn in April 2025, up from –€0.2bn in April 2024. Revenue from retroactive prepayments of corporation tax for 2023 and 2024 increased in April. Research allowance payments financed from corporation tax receipts totalled roughly €65m. Like the research allowance payments financed from income tax receipts, this was markedly higher than the figure from April 2024.

Receipts from non-assessed taxes on earnings were down by nearly 4% on the year in April 2025. The next few months – usually the time when a significant share of annual receipts from non-assessed taxes on earnings is collected due to the dividend payment dates of large stock corporations – are likely to have a major impact on annual figures for these taxes. In contrast, revenue from final withholding tax on interest and capital gains surged by over 55% despite the already very high 2024 baseline. Due to a lack of statistical information, it is not possible to reliably assess the extent to which this increase is attributable to a rise in interest income and/or capital gains. However, it is likely that capital gains played a larger role than previously in driving up revenue, due to the growth in capital gains in recent months.

Value added taxes

Receipts from value added taxes were down slightly on the year in April 2025, thereby somewhat offsetting the sharp gains recorded in March. In cumulative terms, VAT revenue was up by about 5½% on the year in the first four months of 2025. This is more in line with underlying aggregate economic trends, where factors that have a key impact on VAT receipts (such as nominal retail sales) are showing only moderate levels of growth. The results from March and April confirm once again that – given the volatility of VAT receipts over the course of a year – the figures for a single month often provide limited insights into future revenue trends. This is particularly true in the case of import VAT revenue, which was down by over 5% on the year in April despite the recent year-on-year increase in nominal imports. Year-on-year figures for VAT revenue are expected to remain volatile over the course of 2025, due among other things to trends in receipts from the “One Stop Shop” (OSS)¹ scheme.

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Borrowing and guarantees

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