Forecast revised downwards
Experts expect significantly less tax revenue
5/11/2023 3:03 p.m
In the coming years, the government’s financial leeway will be even tighter than expected. The Tax Estimation Working Group assumes that the federal government will have to reckon with more than 70 billion euros less tax revenue by 2027.
The federal, state and local governments will probably have to make do with less tax revenue in the coming year than was assumed in the autumn. The tax estimators are assuming that 30.8 billion euros less will flow into the coffers than expected. Overall, they expect revenues of 962.2 billion euros for 2024.
The main reason for the minus is the adjustment for inflation in income tax, which was decided according to the last estimate. “We are giving people and companies back around 34 billion euros annually during the estimated period,” explained Finance Minister Christian Lindner. The estimation period covers the years up to 2027 – here the estimators forecast an average of around 30 billion euros less income than last time.
Lindner emphasized that the state kept its promise not to enrich itself from inflation. In 2025, according to the forecast, tax revenue for the whole state will exceed the one trillion euro threshold for the first time. According to the forecast, the federal government itself will have around 377.3 billion euros at its disposal in the coming year. This means that Lindner has 13 billion less leeway in its budget for 2024 – the hoped-for relaxation of the budget dispute that has been deadlocked in the federal government for months does not materialize.
Lindner insists on compliance with the debt brake
Lindner has identified a budget gap of around 20 billion euros. Among other things, additional costs due to the collective bargaining agreement in the public sector and higher interest rates must be compensated. Lindner emphasized that this gap had to be created by doing without. “We can only spend what the people and businesses in this country make,” he said. “We all have to face this budgetary reality.”
Lindner insists on complying with the debt brake prescribed in the Basic Law again next year. On the other hand, he also rules out tax increases to further increase income. His calculation will therefore only work out if some of his fellow ministers refrain from spending and making wishes. Because of the disagreements in the traffic light coalition, the Minister of Finance had completely refrained from presenting the usual key budget figures.
He is also unable to meet the initially targeted date for the presentation of the government draft in the cabinet. He will only give the plans for 2024 to the ministerial round after June 21, said the FDP leader on the way to the meeting of G7 finance ministers in Niigata, Japan. After that, it’s the turn of the Bundestag, which wants to decide on the budget at the beginning of December.
The tax assessment working group meets twice a year, in spring and autumn. The committee consists of experts from the Federal Government, the leading economic research institutes, the Federal Statistical Office, the Bundesbank, the Council of Experts for the Assessment of Macroeconomic Development in Germany as well as representatives of the state finance ministries and the municipalities.