German gov’ts to have less-than-expected tax revenue in coming years

BERLIN, May 9 (Xinhua) — According to current tax estimates, the German federal, state and local governments will have 124.3 billion euros (139.5 billion U.S. dollars) less to spend by 2023 than previously predicted, the Federal Ministry of Finance announced on Thursday.

According to the German finance ministry, expectations about the extent of the rising tax revenues of the federal, state and local governments had lowered compared with the previous tax estimate in fall 2018.

By 2023, the German government will have 70.6 billion euros less to spend, despite the fact that its tax revenues would rise slightly from 324.3 billion euros this year to 360.3 billion euros in 2023, according to the estimates.

Uncertainties in world trade due to trade conflicts and Brexit were leading to slower economic growth and “the current dent in growth is having a sustained negative impact on the level of tax revenues”, the finance ministry said in a statement.

At the same time, German tax revenues would be reduced by “further decisions implemented by the federal government”.

The ministry calculated that total tax revenues in 2019 would amount to 793.7 billion euros, a figure that is expected to grow to 908.4 billion euros by 2023.

“Growth will remain, albeit at a slower pace,” said German Minister of Finance, Olaf Scholz, who presented the results of the current tax estimates. For this year alone, Scholz was expecting to have almost ten billion euros less available in the federal budget than expected.

Twice a year, a working group of the German finance ministry calculates what tax revenues the federal government, the federal states and the municipalities can expect in the coming years. The results play a big role in whether the German government’s plans can be financed or not.

“The German government is ignoring the enormous pressure under which Germany’s industrial companies are under as a result of fierce international tax competition,” commented Joachim Lang, director general at the Federation of German Industries (BDI) on the newest tax estimates.

“It is high time we gave taxpayers some air,” added Lang and called for an upper limit for the tax burden on German companies of 25 percent.

Similarly, president of the Federation of German Wholesale and Foreign Trade (BGA) Holger Bingmann said that “it is high time that the Grand Coalition adapted its political agenda to the economic reality”.

“The overdue modernization of corporate taxation with modern and competitive tax rates would be a strong signal that the politicians have recognized the signs of the times and are serious,” Bingmann said.

The German government is now expecting gross domestic product (GDP) to grow by only 0.5 percent. At the end of 2018, the German government had still expected a plus of 1.8 percent.

In response to lower tax figures, the German finance ministry cautioned that a comparison of the results of the tax estimate of fall 2018 with the estimate published on Thursday was “misleading”.

The “majority of German tax law changes as well as the slowing economy” had already been taken into account in the key figures for the 2020 budget and the financial planning until 2020.

Repeating that Germany will not further increase its national debt, the finance ministry emphasized that “the clear requirement here is, and remains, a balanced budget without new debts”.

“It is now crucial to set the right priorities and to invest wisely in the future and in social cohesion in our country,” the German finance ministry added.