Special effect for wage tax
The federal and state governments collect more taxes
October 20, 2023, 12:55 a.m
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A good week before the next tax estimate, the federal and state governments are reporting additional revenue for September. One of the reasons, however, is an effect of the energy price flat rate last year. Meanwhile, the countries have stagnating income in the first nine months.
The federal and state governments once again collected significantly more taxes in September than a year ago. In total, they took in 80.6 billion euros, 13.3 percent more, according to the monthly report from the Federal Ministry of Finance. In August there was already an increase of almost nine percent. The FDP-led ministry pointed to weak figures from the previous year due to strong state aid at the time in the wake of the energy crisis. This can now be seen in the strong increases in wage tax and energy tax. In addition, however, there is also a sharp increase in revenue from the withholding tax on interest and sales income.
In the first nine months, tax revenue increased by just 2.5 percent to a good 608 billion euros. An increase of almost three percent is estimated for 2023 as a whole. However, new estimates from tax experts will be published next Thursday. It will then become clear whether the traffic light government will have more financial leeway or whether it will have to tighten its consolidation course.
Payroll tax revenue rose by around 125 percent year-on-year in September. In the previous year, the payment of the energy price flat rate reduced tax revenue in this area, as the ministry explained. At that time, all employees subject to income tax received a one-off payment of 300 euros.
Poor economic prospects
The federal government alone collected 16.3 percent more in taxes in September and achieved revenue of 35.1 billion euros. The states received 10.5 percent more at 36.6 billion euros. In the first nine months, the federal government recorded an increase of 7.2 percent. However, state tax revenue fell slightly by 0.5 percent compared to the same period last year.
Overall, the short-term economic outlook remains “noticeably cloudy” given the survey-based leading indicators, according to the monthly report. In principle, uncertainty about future economic development remains significantly increased. “There are downside risks, particularly with regard to geopolitical conflicts,” said the Treasury Department.
According to economists, the German economy slowed down in the third quarter. The ministry referred to exports, which suffered a noticeable setback in August for the second time in a row as a result of a slowing global economy. Domestic demand is also subdued. Imports fell and the continued reluctance of consumers was reflected in the lower sales in the hospitality and retail sectors, the ministry continues.
The weak economic development is also leaving its mark on the fundamentally robust labor market. Unemployment rose slightly again in September, adjusted for seasonal effects. However, employment is at a historically high level. In view of the inflation rate, which fell significantly to 4.5 percent in September due to base effects, the ministry expects further falling rates.