Estimates better than expected
Higher tax revenues despite the Ukraine war
May 12, 2022, 4:13 p.m
The forecasts of the tax estimators are higher than expected. But because of the Ukraine war and the corona pandemic, they should be treated with caution. Finance Minister Lindner speaks of a “snapshot in times of high uncertainty”.
The Ukraine war and the corona pandemic are making the economy in Germany fragile – but this is probably not reflected in the state’s tax revenue for the time being. The tax estimators are assuming that the federal, state and local governments will even take in 40.4 billion euros more this year than expected in November. As the Ministry of Finance announced in Berlin, the state can expect additional revenue of around 220 billion euros by 2026. Then the state could post more than one trillion euros in tax revenue for the first time in one year.
Federal Finance Minister Christian Lindner spoke in Berlin of a “snapshot in times of high uncertainty” with regard to the tax estimate. He also referred to government relief packages that had already been approved but had not yet come into force. The ministry put the financial impact of this at a total of 51.1 billion euros by 2026, of which 21.92 billion euros for the current year alone. “The economic consequences of the Russian war of aggression are still not foreseeable,” emphasized the FDP politician.
The fact that the forecast for tax revenue is not bleak is partly due to high inflation. As a rule, this also leads to higher tax revenues – unless citizens drastically limit their consumption. This is not happening at the moment, probably also because many are catching up on expenses from the Corona period, going back to the restaurant and going on vacation. Companies are also spending more money again when their employees return to the office from their home office. Added to this is the declining number of unemployed: more people in the job means more income tax for the state, and a rise in wages as a result of inflation would add to this.
More than a trillion for the first time in 2026
Despite the crises, Lindner can hope for record tax revenues in the coming years. For the year 2026, the estimators predict revenues of more than one trillion euros for the first time. The tax estimate is an important basis for ongoing deliberations on the federal budget and financial planning for the following years. So far, Lindner is planning debts of 138.9 billion euros for the current year. From 2023 he wants to comply with the debt brake suspended because of the pandemic. Then only around 7.5 billion euros in loans would be allowed. In addition, the federal government must then start repaying the many billions in corona loans.
The tax assessment working group meets twice a year, in spring and autumn. The committee is made up of experts from the federal government, the five leading economic research institutes, the Federal Statistical Office, the Bundesbank, the Council of Experts for the Assessment of Economic Development in Germany, representatives of the state finance ministries and the municipalities. Your forecast additional income is distributed relatively evenly over the entire estimation period with amounts between a good 40 and a good 46 billion euros per year. The distribution of the increase in income between the federal and state governments is also relatively balanced, for the municipalities it is around six billion euros per year.