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The post-crisis recovery in the crown is more hesitant than expected. In the next year, the federal, state and local governments will have to make do with 19.6 billion euros less in tax revenue than expected in May. As for the period from 2020 to 2024, it even reaches around 29.6 billion euros, which is lacking compared to the previous estimate. Fiscal estimators expect that the pre-crisis level will not be reached again until 2022, as announced by the Ministry of Finance.
The tax estimate is an important basis for the federal budget for next year, which Finance Minister Olaf Scholz (SPD) intends to present to the cabinet on September 23. The vice-chancellor assumes that new debts will be necessary again in 2021.
It was already clear that the crisis of the crown with aid packages worth billions of dollars would open huge holes in the state coffers this year. In the first half of the year, according to preliminary data from the Federal Statistical Office, the federal, state, municipal and social security funds spent 51.6 billion euros more than they received.
At the same time, tax revenues are falling for the first time since the financial crisis of 2009. Meanwhile, appraisers assume that in 2020 they will arrive around 81.6 billion euros less taxes than last year, less than 10 percent. By doing so, they roughly confirm their May forecast, when they expected less than $ 81.5 billion.
This year almost 218,000 million euros in new debt
To finance aid packages such as VAT cuts, family allowances and support for the worst-hit businesses, the federal government plans to take on up to € 217.8 billion in new debt this year. That’s almost five times more than in the previous record debt year of 2010 during the financial crisis. Most loans after 2023 must be repaid in 20 years.
An essential basis for estimating taxes is the economic forecast of the federal government. It goes on to assume that Germany is in the worst recession in postwar history. There are signs that the economy is on the rise again, but also that the recovery could take longer than initially thought.
Economic output is likely to plummet 5.8 percent this year. This not only causes sales and trade taxes to collapse, but also income tax due to the drastic reduction in work.
By 2021, Economic Affairs Minister Peter Altmaier expects growth of just 4.4 percent, up from 5.2 percent previously. He cited the difficult situation of the world economy as one of the reasons, also in view of the high number of infections in the United States, for example.
Expected frame
Actually, the tax assessment working group meets twice a year, in the spring and fall. Because the effects of the corona pandemic were still difficult to assess in spring, an extraordinary meeting was inserted. The evaluation committee includes experts from the federal government, the five main economic research institutes, the Federal Statistical Office, the Bundesbank, the Advisory Council for the Evaluation of Economic Development in Germany, representatives of the state finance ministries and municipalities. Review the expected income for all types of taxes and then add them together.
Presenting the fiscal estimate, Olaf Scholz said: “We have finances under control. The revenue shortfall is within the expected range.” The Federation of German Industry (BDI) warns against erroneous conclusions of the tax estimate: “With the tax increase plans, as last expressed by the Federal Minister of Finance, we are pushing the economy against the wall,” it says in a message.
