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21 August 2017

Tax rev­enue in Ju­ly 2017

Information on tax revenue from the Finance Ministry’s monthly report for August 2017.

Trends in general government tax revenue

Current-year trends in tax revenue (excluding local authority taxes)

2017

July

Year‑on‑year
change

January to

July

Year‑on‑year
change

2017 estimates4

Year‑on‑year
change

in €m

in %

in €m

in %

in €m

in %

Joint taxes

 

 

 

 

 

 

Wages tax2

16,904

+4.7

110,468

+6.2

194,250

+5.1

Assessed income tax

-187

X

31,647

+15.9

57,500

+6.8

Non-assessed taxes on earnings

4,215

+47.0

13,436

 -1.6

19,450

+0.0

Final withholding tax on interest and capital gains

484

+11.7

4,649

+23.7

6,548

+10.2

Corporation tax

187

 -35.1

16,570

+3.2

27,080

 -1.3

Value added taxes (VAT)

18,927

+9.5

130,672

+5.0

227,550

+4.8

Trade tax apportionment

937

+4.4

2,318

+12.3

4,658

+9.9

Increased trade tax apportionment

937

+6.3

2,053

+11.3

3,879

+7.9

Total joint taxes

42,404

+9.9

311,814

+6.4

540,915

+4.7

Federal taxes

Energy duty

3,614

+7.4

18,517

+3.8

40,200

+0.3

Tobacco duty

1,207

+68.8

7,478

 -1.3

14,190

+0.0

Spirits duty incl. alcopops duty

174

+1.9

1,228

+1.6

2,070

 -0.0

Insurance tax

665

+1.7

9,196

+3.7

13,200

+3.4

Electricity duty

531

 -2.8

4,061

+8.4

6,600

+0.5

Motor vehicle tax

718

 -6.5

5,628

+0.1

9,000

+0.5

Aviation tax

102

+20.8

571

+9.5

1,125

+4.8

Nuclear fuel duty

0

X

-6,284

X

0

X

Solidarity surcharge

1,133

+4.8

10,266

+7.7

17,600

+4.4

Other federal taxes

109

 -2.0

826

+1.0

1,458

 -0.0

Total federal taxes

8,254

+7.6

51,486

 -8.1

105,443

+1.0

Länder taxes

Inheritance tax

441

 -9.6

3,620

 -18.5

6,010

 -14.2

Real property transfer tax

1,089

+11.0

7,578

+6.0

12,730

+2.6

Betting and lottery tax

135

 -1.0

1,100

+5.9

1,870

+3.4

Beer duty

68

+3.3

385

 -0.8

671

 -1.0

Other Länder taxes

24

+15.1

315

+5.0

453

+2.6

Total Länder taxes

1,757

+3.8

12,998

 -2.4

21,734

 -2.7

EU--European Union own resources

Customs duty

424

+0.5

2,929

+0.1

5,200

+1.7

VAT-based own resources

197

 -38.2

1,378

 -44.4

2,450

 -42.4

GNI-based own resources

1,694

+1.8

7,124

 -34.8

18,200

 -8.6

Total EU own resources

2,315

 -3.7

11,431

 -30.0

25,850

 -11.7

Federation3

22,811

+11.7

171,024

+4.5

308,028

+6.6

Länder 3

24,637

+8.5

171,377

+5.5

294,824

+2.1

EU

2,315

 -3.7

11,431

 -30.0

25,850

 -11.7

Local authorities’ share of income tax and value added tax

3,075

+8.7

25,394

+10.7

44,590

+7.8

Total tax revenue (excluding local authority taxes)

52,839

+9.2

379,227

+3.8

673,292

+3.9

Tax revenue in July 2017

Total tax revenue (excluding local authority taxes) recorded a sharp year-on-year gain of 9.2% in July 2017. This is mainly due to a 9.9% rise in revenue from joint taxes, to which value added taxes, non-assessed taxes on earnings, and wages tax all contributed. However, the increase in receipts from value added taxes was skewed positively by a one-off effect in July last year. Temporal shifts from June to July 2017 in revenue from non-assessed taxes on earnings should also be taken into account. A higher yield from energy duty and overstated revenues from tobacco duty (owing to baseline effects) resulted in a 7.6% increase in receipts from taxes accruing solely to the Federation. Revenues from taxes accruing solely to the Länder rose by 3.8%: the rise in receipts from real property transfer tax more than compensated for lower inheritance tax receipts.

EU own resources

Payments of own resources to the EU, including customs duties, fell by 3.7% in July 2017 compared with the same month last year. A substantial cumulative drop of 30.0% was registered for the January–July period. Transfers have declined sharply this year as a result of (a) balances resulting from EU adjustments and amending budgets and (b) the implementation of the EU’s new Own Resources Decision. Overall, it is anticipated that Germany’s transfers of own resources to the EU will be lower this year than in 2016. The amount of the monthly transfers is determined by the EU’s financing needs at any given time.

Overview of the January–July 2017 period

Total tax receipts increased by 3.8% on the year in the first seven months of 2017. This was driven mainly by a cumulative rise of 6.4% in revenue from joint taxes. Yields from taxes accruing solely to the Federation and from taxes accruing solely to the Länder, on the other hand, posted drops of 8.1% and 2.4% respectively.

Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants to the Länder) rose by 11.7% on the year in July 2017. This trend was driven by a marked 9.4% increase in the Federation’s share of revenue from joint taxes as well as by the 7.6% rise in receipts from taxes accruing solely to the Federation. Lower supplementary federal grants to the Länder, which are shown as expenditures in the Federation’s tax revenue calculations, also had a positive impact on the Federation’s receipts. After accounting for supplementary federal grants, the Länder’s tax receipts rose by 8.5%. This was driven by higher receipts from joint taxes (up 10.6%) and federal subsidies for public transport (up 12.7%) as well as by a slight increase in revenue from taxes accruing solely to the Länder (up 3.8%). The local authorities’ share of revenue from joint taxes was up by 8.7% on the year overall.

Joint taxes

Wages tax

The upward trend in wages tax revenue seen in recent months continued in July 2017, albeit at a somewhat slower pace. Sustained positive employment trends and rising wages continue to have a favourable impact on wages tax revenue. The number of persons in employment rose by nearly 400,000 in the first half of 2017. Gross wages tax revenue climbed by 4.2% on the year in July 2017. Cash receipts from this tax increased by 4.7% after deducting child benefit payments, which are financed from wages tax revenue and rose by 2.1% on the year. In cumulative terms, cash receipts from wages tax posted a 6.2% gain in the seven-month period from January to July 2017.

Corporation tax

The positive trend in corporation tax receipts continued. July is a low-yield month for corporation tax, so revenue was mainly generated from assessment activities. Prepayments of assessed income tax for preceding years increased, while back payments remained unchanged and refunds following completed audits rose. Overall, gross receipts from corporation tax fell by 37.1% to approximately €0.2bn. The deduction of investment allowance payments had only an insignificant impact on cash receipts. Total cash receipts from corporation tax over the January–July 2017 period were up by 3.2%. However, a high volume of corporation tax refunds is still expected over the course of 2017 as a result of high court rulings (Federal Fiscal Court rulings on the STEKO case and section 40a of the Capital Investment Companies Act).

Assessed income tax

As with corporation tax, revenue trends from assessed income tax were driven by assessment activities. There were no significant changes in the balance between prepayments, back payments and refunds (excluding employee refunds). Gross receipts from assessed income tax saw a slight decline of about €0.1bn ( 6.4%) and stood at approximately €1.3bn. Refunds made to employees assessed for income tax dropped by 7.2%. Payments of investment allowance and owner-occupied homes premium now have only a slight impact on revenue from assessed income tax. On balance, cash receipts from assessed income tax remained unchanged at last year’s level. On a cumulative basis, they rose by 15.9% on the year in the January–July period.

Non-assessed taxes on earnings

Taxes on dividend distributions by corporations are the main source of revenue in the category of non-assessed taxes on earnings. Following a 50.4% decline in June, gross revenue from non-assessed taxes on earnings rose by 45.3% on the year in July. This is presumably a result of a June-to-July shift in the scheduling of dividend distributions. Refunds paid out by the Federal Central Tax Office, which are subtracted from revenue totals, were up by 7.0%. Overall, cash receipts from non-assessed taxes on earnings posted substantial year-on-year growth of 47.0% in July. Cumulative cash receipts from non-assessed taxes on earnings in the first seven months of 2017 were down by 1.6% on the year.

Final withholding tax on interest and capital gains

Revenue from withholding tax on interest and capital gains posted a year-on-year gain of 11.7% in July 2017, continuing the positive trend seen in the last few months. Given the ongoing low interest-rate environment, this cannot be attributed to taxes on interest and is more likely to be linked to trends in capital gains. It is fair to assume that stock market trends have led many investors to realise profits by selling their shares, resulting in an increased yield from capital gains tax. However, no separate statistics are kept on the two revenue components, so it is not possible to provide reliable information on this question. In cumulative terms, revenue from final withholding tax on interest and capital gains rose by 23.7% on the year in the first seven months of 2017.

Value added taxes

Revenue from value added taxes posted a substantial increase of 9.5% in July 2017. Receipts from domestic VAT rose by 11.1%, while the yield from import VAT was up by 4.8%. Although the VAT result for July 2017 was skewed positively by a special case affecting last year’s figure, the yield from value added taxes nevertheless recorded a considerable gain of 6.0% after adjustment for this case. For the entire period from January to July 2017, value added tax revenue increased by 5.0%.

Taxes accruing to the Federation

Receipts from taxes accruing solely to the Federation were up by 7.6% on the year in July 2017. Revenue gains were posted for energy duty (+7.4%), tobacco duty (+68.8%), solidarity surcharge (+4.8%) and insurance tax (+1.7%), while revenue drops were registered for motor vehicle tax ( 6.5%) and electricity duty ( 2.8%). The increase in tobacco duty revenue is overstated as a result of a low baseline figure from 2016. Taken cumulatively, receipts from taxes accruing solely to the Federation dropped by 8.1% on the year in the first seven months of 2017. The reason for this decline is the Federal Constitutional Court’s decision of 13 April 2017 (2 Bvl 6/13). The court ruled that the Nuclear Fuel Duty Act is unconstitutional and therefore null and void. Tax collected on the basis of this law was therefore paid back in June, and tax revenues took a €6.3bn hit as a result.

Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder were up by 3.8% on the year in July 2017. While revenue from real property transfer tax posted gains of 11.0%, inheritance tax receipts declined by 9.6%. Cumulative receipts from taxes accruing to the Länder in January–July 2017 were 2.4% below last year’s figure. This can be attributed to the fall in inheritance tax yields, which had benefited from several big inheritance cases in 2016.