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Part of the government’s stimulus package to deal with the corona pandemic is the reduction of VAT, which is limited to the second half of 2020. This now also affects the level of federal and state tax revenue. According to the latest monthly report from the Federal Ministry of Finance, the volume in September has again dropped significantly.
“The economic effects of the crisis on the crown continued to burden tax revenues,” the Reuters news agency quoted in the report. As a result, tax revenue fell 12.8 percent to € 63.52 billion. In the period from January to September 2020, the difference was a good 8 percent, with revenue of around 496 billion euros.
Child Allowance Reduces Income Tax Revenue
Income from corporate income tax was also a good quarter below the figure for the previous year, as a result of postponements and the reduction of company advances so that they have more liquidity in the short term. There was also a significant decrease in the tax on wages. This was mainly due to the payment of the first installment of the 200-euro child bonus, which is paid out of the income tax collection ”.
In the first nine months, the federal budget showed a financing gap of 72.5 billion euros. Because in addition to lower income, Corona aid is also reflected in significantly higher expenses.
After the historic recession in the first half of the year, the Finance Ministry expects “strong growth” in the third quarter. However, the recovery has recently lost some momentum. “The further recovery process is still associated with risks due to the dynamic infection process.”
