More taxes due to higher prices
Government deficit falls – also thanks to inflation
10/11/2022, 10:15 am
The federal, state and local governments reduced the deficit in the first half of the year through higher income. They benefit from the more active economy, but also from higher tax revenues due to inflation. In addition, expenses are also reduced.
The sharp increase in tax revenue, also due to high inflation, reduced the German government’s financing deficit in the first half of the year. According to the Federal Statistical Office, the deficit from the federal, state, local and social security funds was 32.9 billion euros in the middle of the year. In the first half of 2021, the cash deficit still totaled 131.1 billion euros. While revenue increased by 11.9 percent to 841.4 billion euros this time, also due to inflation, expenses fell by 1 percent to 874.3 billion euros due to the expiry of corona measures.
“Above all, revenue from taxes and parafiscal charges contributed to the growth in public revenue,” emphasized the statisticians. They rose in the first half of the year by 12.5 percent to 744.2 billion euros. The growth in sales taxes was particularly large: At the federal level, revenue from sales and import sales tax rose by 30.4 percent to 68.2 billion euros, at the federal states by 23.2 percent to 70.1 billion euros.
“However, this income is mainly based on sales in the months from November 2021 to April 2022, in which the economy was significantly more active than in the pandemic months of the comparison period 2020/21, when a reduced VAT rate still applied in some cases,” the statement said. “Another part of the current increase can also be explained by the extraordinarily high inflation.” Revenue from VAT, for example, increases with inflation.
The slight fall in spending is mainly due to the fact that the federal government had to make less money available to deal with the corona pandemic. Allocations, grants and debt service assistance from the federal government fell by 3.2 percent to 195.6 billion euros. “The drop in corporate aid from Corona made itself felt here,” it said. The 67.9 percent lower spending on federal loans can be explained, among other things, by lower liquidity support to the Federal Employment Agency.