Friday, February 3

German tax revenues are increasing significantly

By Andreas Killer

BERLIN (Dow Jones)–German tax revenue rose significantly by 19.5 percent in December 2021 and also rose sharply by 11.5 percent in 2021 as a whole. This was announced by the Federal Ministry of Finance in its monthly report. The increase in income in December was mainly due to an increase in community taxes of 25.0 percent.

“Among other things, there were some significant increases in wage tax, sales tax, assessed income tax and corporation tax compared to the same month last year,” the ministry said. “This should also reflect the economic recovery that was recorded in the second and third quarters of 2021 and as a result of which gross domestic product in 2021 increased by a total of 2.7 percent compared to the previous year.”

According to the information, the increase also resulted from a lower basis at the time of comparison due to the temporary reduction in VAT in the second half of 2020. In addition, due to a cash register effect, there was a shift in revenue from import VAT from November to December 2021 and thus a noticeable increase in revenue.

In December, the federal government booked 25.9 percent more tax revenue and reached 52.9 billion euros. The federal states received 49.1 billion euros in taxes, 21.7 percent more. Total tax revenue in December amounted to around 111.5 billion euros. For the whole of 2021, tax revenues totaled 761.0 billion euros. The federal government recorded an increase of 10.8 percent and the federal states recorded growth of 12.3 percent.

Economy still subdued for the time being

With regard to economic development, the Ministry of Finance explained that even at the start of the current year “the pandemic is likely to continue to weigh on economic activity before a continuation of the recovery can be expected in the further course of the year”. The upward momentum is likely to have been “interrupted towards the end of the year” and it is to be expected that “the subdued development of the economy will continue in the current quarter”.

The delivery bottlenecks for preliminary products and raw materials and the sharp increase in the number of infections in the course of the Omikron wave had weighed on the mood around the turn of the year. Assuming that the infection situation eases again and supply bottlenecks decrease, “a strong continuation of the recovery is expected for the summer half of 2022”. The order backlog in industry is very high, and here – as with private consumer spending – there is considerable potential for strong impetus, also from catch-up effects.

With regard to inflation, it was said that with the turn of the year “slightly lower rates are to be expected, although – above all due to the sharp increase in energy prices and supply bottlenecks in the meantime – rates will continue to rise”. In the course of 2022, however, the inflation rate “is likely to fall to a more moderate level”.

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(END) Dow Jones Newswires

January 27, 2022 18:00 ET (23:00 GMT)