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Germany On Right Fiscal Course, Tax Estimate Shows

by Ulrika Lomas,, Brussels

06 November 2012

According to the German finance ministry, Germany’s federal government, federal states and municipalities can expect additional tax revenues for 2012 compared with the previous tax estimate made in May, although this will not be the case in subsequent years.

As a result of the positive economic development in Germany, both fiscal income derived from wages and from corporate profits have given a further boost to state tax revenues, the ministry added, while emphasizing that this trend is not set to continue. Tax experts have forecast only a slight increase in tax revenue in 2013 and 2014 compared with the last tax estimate.

The announcement from the finance ministry follows the recent tax estimate meeting in Frankfurt-am-Main, during the course of which tax revenue predictions were made for the period 2012-2017.

Compared with the last tax estimate in May 2012, total tax revenues are expected to be up this year by around EUR5.8bn (USD7.5bn). The federal government is expecting additional tax revenues of EUR3.9bn, of which EUR1.2bn is attributable to lower European Union transfers. The federal states and municipalities are expecting significant increases in tax revenues of EUR2.6bn and EUR0.8bn respectively.

The tax estimate is further evidence of fiscal drift in the country’s income tax system, and confirmation of the need to alleviate the effects of the phenomenon from January 1, 2013, the ministry explains, noting that this is not only right and necessary but also compatible with budgetary consolidation.

German Finance Minister Wolfgang Schäuble welcomed the latest forecast, insisting that the results are clear evidence that the government’s policy of growth-friendly consolidation is functioning and that the course has been properly set.

Schäuble pointed out that the government has used the good economic development in Germany over the past two years to consolidate the budgets, noting that despite the fact that only very slight additional revenues are predicted for 2013, the government is expecting an almost balanced budget in 2013, thereby meeting the debt brake target three years earlier than provided for in the basic law.

The additional revenues in 2012 will allow the government to further reduce net borrowing, Schäuble said, stressing that Germany’s finances are in good shape and underlining the need to maintain this course.

TAGS: tax | law | budget | corporation tax | Germany | revenue statistics | individual income tax

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