The energy crisis is creating gloomy economic prospects – but the state’s tax revenues are expected to rise sharply during these times. The tax estimators assume that the federal, state and local governments will earn around 126.4 billion euros more by 2026 than expected in May. This was announced by the Ministry of Finance in Berlin. This year, however, tax revenue is expected to be 1.7 billion euros lower than predicted.
“The current estimates are characterized by a high degree of uncertainty,” said Finance Minister Christian Linder (FDP). The risks for economic development are great, especially with regard to possible bottlenecks in the energy supply in the coming months.
Debt brake should be complied with again
In 2023, Lindner plans to fully comply again with the debt brake suspended due to the corona pandemic. The tax experts expect additional income of 8.9 billion euros for 2023. That would mean record revenues of 937.3 billion euros. However, the Minister of Finance is unlikely to be able to make any big leaps, because in the coming year relief may again be necessary due to the high prices for the citizens. Lindner said: “But it is also clear that there is no scope for additional expenditure.”
One of the reasons for the rising tax revenue is the high inflation rate. As long as consumers do not limit their consumption, inflation favors tax revenues. Because if goods become more expensive, the income from the taxes that have to be paid on them also increases. Above all, the value added tax flushes more money into the coffers.
Labor market is robust
The number of employees also has a positive effect on tax revenue: if many people are employed, more wage and income tax revenue flows into the state coffers. Despite the crisis, the labor market has recently been robust. However, leading economic institutes expect the unemployment rate to rise next year due to the economic downturn.
Because of the energy crisis, the federal government recently lowered its economic forecast. In its autumn projection, it expects only small economic growth of 1.4 percent for this year, with the economy shrinking by 0.4 percent in the coming year. An increase in gross domestic product of 2.3 percent is expected for 2024 – tax revenue is then expected to increase to around 993 billion euros.
The tax assessment working group meets twice a year, in spring and autumn. The committee consists of experts from the Federal Government, the leading economic research institutes, the Federal Statistical Office, the Bundesbank, the Council of Experts for the Assessment of Economic Development in Germany, representatives of the state finance ministries and the municipalities.
