Federal budget trends up to and including August 2020

Table: Trends in the federal budget

Expenditure (€bn)3

343.2

508.5

267.0

Year-on-year change in % (year to date)

 

 

+15.6

Revenue (€bn)4

356.5

290.4

196.6

Year-on-year change in % (year to date)

 

 

-11.6

Tax revenue (€bn)

329.0

264.4

178.0

Year-on-year change in % (year to date)

 

 

-12.2

Balance of pass-through funds (€bn)

0.0

0.0

0.0

Fiscal balance (€bn)

13.3

-218.1

-70.4

Financing/use of surplus:

-13.3

218.1

70.4

Cash resources (€bn)

-

-

-4.2

Seigniorage (€bn)

0.2

0.3

0.2

Movements in reserves5 (€bn)

-13.5

0.0

0.0

Net borrowing6 (€bn)

0.0

217.8

74.4

Any discrepancies in totals are due to rounding.

1Including second supplementary budget in accordance with the Act Adopting a Second Supplement to the Federal Budget for the 2020 Fiscal Year (Gesetz über die Feststellung eines Zweiten Nachtrags zum Bundeshaushaltsplan für das Haushaltsjahr 2020) of 14 July 2020 (Federal Law Gazette I No 35, p. 1669).

2As per accounts.

3With the exception of expenditure on the repayment of debt incurred on the credit market, allocations to reserves and expenditure made to cover a cash deficit. Excluding expenditure from internal offsetting.

4With the exception of revenue from loans on the credit market, withdrawals from reserves, revenue from cash surpluses and seigniorage. Excluding revenue from internal offsetting.

5Negative values denote accumulation of reserves.

6(-) debt repayment; (+) borrowing

Source: Federal Ministry of Finance

Actual 2019

2020 target1

Actual2

January–August 2020

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Revenue

Federal revenue for the period from January to August 2020 totalled approximately €196.6bn, down by 11.6% (about €25.7bn) on the year. The consequences of the Covid-19 pandemic and the associated tax-related assistance measures to deal with the crisis have led to a sharp decline in tax revenue compared with the same period in 2019. Tax receipts (including transfers of own resources to the EU) declined by 12.2% (roughly €24.7bn) compared with the first eight months of 2019. Receipts from value added taxes as well as from income tax and corporation tax have been particularly affected, falling by €12.6bn and €7.7bn, respectively.

The category of “other revenue” was down by 5.1% (roughly €1.0bn) on the year in the January–August period. This can be attributed to lower revenue from business activities as well as from claims arising from guarantees.

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Expenditure

By adopting two supplementary budgets, the German government has taken decisive action in response to the challenges posed by the coronavirus pandemic both to health and to the economy. The additional expenditure contained in these two supplementary budgets now dominates the structure of federal spending. Expenditure in the first eight months of 2020 totalled €267.0bn, up by 15.6% (about €36.0bn) over the same period last year. A breakdown by economic category shows that the spending increase in the January–August period was primarily due to a year-on-year rise of 16.3% (approximately €34.5bn) in consumption spending. Ongoing subsidies to companies made up most of the increase. By the end of August 2020, approximately €14.5bn in immediate assistance for small companies and self-employed individuals affected by the fallout from the Covid-19 pandemic had been disbursed, out of the €18bn earmarked for this purpose in the second supplementary budget. Approximately €4.1bn in additional funds for ongoing grants to social institutions to fight the coronavirus have been spent (2020 target: €9.1bn). In addition, ongoing grants to public administrations were significantly higher than in the same period of 2019. This category includes roughly €7.7bn in compensation payments under section 21 of the Hospital Financing Act (Krankenhausfinanzierungsgesetz), out of the €11.5bn earmarked for this purpose for 2020. Grants to social security funds were up by €8.2bn, or 9.1%, on the year. This includes disbursements to the health fund and the long-term care insurance compensation fund totalling €5.3bn, the entire amount earmarked for these funds. The rise in consumption spending was slowed by interest expenditure, which was 39.8% (about €5.2bn) lower than in the same period last year.

Investment spending totalled approximately €21.2bn in the first eight months of the year, an increase of 7.4% (around €1.5bn) over the same period last year. This was mainly due to liquidity assistance totalling around €2.9bn provided to the Federal Employment Agency over the course of the year. Investment grants up until August 2020 decreased due to a special factor: the compensation payments from the Federation to the Länder, for social housing among other things, have been discontinued due to a reorganisation of financial relations between the federal government and the Länder that took effect at the start of 2020. Instead of receiving compensation payments, the Länder now receive a higher share of VAT revenue. In the January–August 2020 period, year-on-year spending increases were recorded for the acquisition of movable assets (up by 26.2%, or approximately €0.3bn). Expenditure for construction projects remained at roughly the same level as last year, increasing by 0.2%.

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Fiscal balance

The federal budget recorded a deficit of €70.4bn for the period from January to August 2020.

Revenue and expenditure are subject to strong fluctuations over the course of the fiscal year and thus have an uneven effect on cash funds in individual months. Net borrowing also tends to fluctuate considerably over the course of the year. This means that the fiscal balance at any given point in the year and the corresponding net borrowing figures are not reliable indicators of the end-of-year figures for the fiscal balance and net borrowing. This is especially the case in the current circumstances.

Trends in federal expenditure by function

Trends in federal expenditure by economic category

Trends in federal revenue

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Tax revenue in August 2020

2020 trends in tax revenue (excluding local authority taxes)

Total tax revenue (excluding local authority taxes) in August 2020 fell by 2.3% on the year. The economic effects of the coronavirus pandemic continued to have a negative impact on tax revenue. Wages tax receipts were down substantially. The tax measures introduced to mitigate the effects of the crisis also had a significant impact on tax revenue. The objective of these measures is above all to quickly provide liquidity for taxpayers affected by the crisis. The measures included tax deferrals, and a significant number of taxpayers availed themselves of this option in August 2020 and in the preceding months. The Länder tax authorities generally granted deferrals for a period of three months. Insofar as follow-up deferrals had not been applied for, a considerable amount of tax payments that had previously been deferred became due in August. As was already the case in July, in August the volume of payments that were due exceeded the volume of newly granted deferrals. As a result, there was on balance an improvement in the revenue situation of the affected tax types, particularly in the case of value added taxes. Receipts from joint taxes were down by 2.2% on the year in August, revenue from taxes accruing solely to the Federation declined by 1.6%, and revenue from taxes accruing to the Länder fell by 8.1%.

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EU own resources

Transfers of own resources to the EU, including customs duties, totalled approximately €1.4bn in August 2020, down from €2.7bn in August 2019, representing a year-on-year drop of 46.3%. Monthly fluctuations occur over the course of the year based on the EU’s financing needs at any given time. However, monthly requisitions are generally in line with the financial framework for the current year.

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Overview of the January–August 2020 period

In the eight months from January to August 2020, total tax receipts fell by 7.3% on the year. Revenue from joint taxes declined by 8.5%, and revenue from taxes accruing solely to the Federation declined by 4.4%. Revenue from taxes accruing solely to the Länder posted an increase of 6.6%.

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Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants to the Länder) dropped by 14.1% on the year in August 2020. The Federation’s take from joint taxes declined by 10.8%. An amendment of the Financial Equalisation Act (Finanzausgleichsgesetz) under the Second Coronavirus Tax Assistance Act (Zweites Corona-Steuerhilfegesetz) reduced the Federation’s share of revenue from value added taxes and increased the shares of the Länder and local authorities accordingly. The purpose of this was to compensate the Länder for their lower tax revenue resulting from (a) the one-time bonus for families with children, which is financed from wages tax revenue, and (b) the temporary reduction in the VAT rate. As a consequence of this, the Federation’s take from VAT revenue was 13.8% lower than in August 2019. Receipts from taxes accruing solely to the Federation fell by 1.6%. The Act on Accompanying Measures to Implement the Stimulus and Crisis Management Package (Gesetz über begleitende Maßnahmen zur Umsetzung des Konjunktur- und Krisenbewältigungspakets), which was adopted in July, allocated additional federal subsidies of €2.5bn for public transport to the Länder. These subsidies were disbursed in August. However, supplementary federal grants to the Länder were down on the year, and own resources payments to the EU were significantly lower than in August 2019.

Länder tax receipts recorded a clear increase of 14.1% on the year in August 2020. This was partly due to the change in VAT revenue distribution mentioned above, which increased the VAT revenue allocated to the Länder (up by 17.8%) and, as a result, their take from joint taxes (up by 6.0%). The transfer of additional federal subsidies of €2.5bn for public transport also played a role. In contrast, revenue from taxes that accrue only to the Länder was down by 8.1% on the year in August. Local authorities’ take from joint taxes was up by 0.6%, partly as a result of the Second Coronavirus Tax Assistance Act.

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Joint taxes

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Wages tax

Wages tax receipts declined in August 2020, with gross revenue decreasing by 5.1% on the year. As a result of the ongoing coronavirus pandemic, many companies have continued to take advantage of the government’s short-time work scheme. This has significantly reduced the amount of gross wages and salaries subject to the deduction of wages tax. Child benefit payments, which are financed from wages tax receipts, posted a slight year-on-year increase of 2.6% in August. On balance, cash receipts from wages tax fell by 6.6% on the year in August 2020. In cumulative terms, cash receipts from wages tax were down by 2.4% on the year in the January–August period.

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Corporation tax

Revenue from corporation tax amounted to approximately €9m in August, generally a low-revenue month for this tax. In August 2019, the corresponding amount was €71m. Year-on-year tax revenue fluctuations of this kind are common. Due to their low volume, investment allowance payments had hardly any influence on receipts. On a cumulative basis, cash receipts from corporation tax fell by 38.8% on the year in January–August 2020.

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Assessed income tax

Revenue from assessed income tax in August was also mainly generated from assessment activities. Gross receipts from this tax increased by 5.6% to approximately €1.0bn. Employee refunds were down by 11.6% on the year in August 2020. After these are subtracted from the gross figure (along with investment allowance payments and owner-occupied homes premiums, which are insignificant in terms of amount), receipts from assessed income tax stood at approximately ‑€0.3bn in August 2020 (compared with ‑€0.5bn in August 2019). In cumulative terms, cash receipts from assessed income tax were down by 11.0% on the year in the January–August period.

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Non-assessed taxes on earnings

Gross receipts from non-assessed taxes on earnings fell by 8.5% on the year in August 2020, following a rise of 41.8% in the previous month. The economic situation resulting from the coronavirus pandemic has led some companies to reduce this year’s dividend payments, so that an overall drop in revenue this year compared with last year is expected. Refunds by the Federal Central Tax Office, which are financed from this revenue, totalled about €230m. As a result, cash receipts from non-assessed taxes on earnings were down by 17.9% on the year in August. Cumulative cash receipts from non-assessed taxes on earnings were down by 18.9% in the first eight months of 2020 compared with the same period of 2019.

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Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains rose by 3.4% in year-on-year terms in August 2020. Thanks to the revenue increases recorded over the course of the year to date, cumulative cash receipts from final withholding tax on interest and capital gains were up by 31.6% on the year in January–August 2020.

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Value added taxes (VAT)

Receipts from value added taxes were up by 2.5% on the year in August 2020. Declines in domestic VAT revenue had been recorded in previous months, partly as a result of extensive deferrals in connection with the coronavirus pandemic. Since most of these deferrals were granted for a period of three months, a substantial volume of taxes that had previously been deferred fell due in August. A significantly lower volume of deferrals was granted in August, leading to a positive impact on revenue totalling approximately €1.2bn. As a result, the yield from domestic VAT increased by 12.6% over the same month last year, while receipts from import VAT registered a 25.2% decline. Cumulative cash receipts from value added taxes fell by 8.6% on the year in the January–August 2020 period.

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Taxes accruing to the Federation

In August 2020, revenue from taxes accruing solely to the Federation was 1.6% lower than in the same month last year. In the case of some taxes, the tax measures that were introduced to improve the liquidity of companies resulted in a decline in revenue. Receipts from energy duty and electricity duty were up on the year, by 0.7% and 1.2%, respectively. In contrast, insurance tax and motor vehicle tax posted revenue declines of 0.9% and 1.1%, respectively. Global air traffic came to an almost complete halt as a result of the shutdown. This, in combination with the granted tax deferrals, led to a 72.3% collapse in aviation tax revenue in August compared with the same period last year. The relaxation of measures to fight the pandemic in the summer only led to a slight recovery in revenue from this tax compared with previous months. Receipts from the solidarity surcharge declined by 3.5% as a result of drops in revenues from income and corporation tax (which constitute its tax base). Tobacco duty revenue was down by 2.5% on the year in August. Trends in revenue from other taxes had only a minor impact on the overall receipts from federal taxes.

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Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder were down by 8.1% on the year in August 2020. This was mainly due to significantly lower revenue from real property transfer tax (down by 11.9%) and inheritance tax (down by 4.5%). Yields from betting and lottery tax, fire protection tax and beer duty all increased on the year, by 1.6%, 4.2% and 3.7%, respectively.

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Borrowing and guarantees

Borrowing trends for the Federation in August 2020

Debt trends for the Federation (budget and special funds) in August 2020

Trends in refinancing the special funds for providing loans to public institutions of the Federation in August 2020

Guarantees

 

Authorised amount

Amount allocated
as of
30 June 2020

Amount allocated
as of
30 June 2019

in €bn

Export credit guarantees

160.0

124.7

119.0

Loans to foreign debtors, foreign direct investment, EIB loans

80.0

41.7

44.5

Financial cooperation projects

35.0

26.5

23.5

Food stockpiling

0.7

0.0

0.0

Domestic guarantees

430.0

274.3

105.4

International financial institutions

100.0

68.6

60.1

Treuhandanstalt successor organisations

1.0

1.0

1.0

Interest compensation guarantees

15.0

15.0

15.0

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Calendar

Publication schedule1 of the monthly reports

October 2020 issue

September 2020

22 October 2020

November 2020 issue

October 2020

20 November 2020

December 2020 issue

November 2020

22 December 2020

January 2021 issue

December 2020

29 January 2021

February 2021 issue

January 2021

19 February 2021

March 2021 issue

February 2021

19 March 2021

April 2021 issue

March 2021

22 April 2021

May 2021 issue

April 2021

20 May 2021

June 2021 issue

May 2021

22 June 2021

July 2021 issue

June 2021

22 July 2021

August 2021 issue

July 2021

20 August 2021

September 2021 issue

August 2021

21 September 2021

October 2021 issue

September 2021

21 October 2021

November 2021 issue

October 2021

19 November 2021

December 2021 issue

November 2021

21 December 2021

1In accordance with the IMF’s Special Data Dissemination Standard Plus (SDDS Plus); see http://dsbb.imf.org

Source: Federal Ministry of Finance

Monthly report

Reporting period

Publication date

Key dates on the fiscal and economic policy agenda

5–6 October 2020

Eurogroup and ECOFIN Council meetings

15–16 October 2020

Meeting of G20 finance ministers and central bank governors in Washington, D.C.

16–18 October 2020

Annual meeting of the IMF and World Bank

3–4 November 2020

Eurogroup and ECOFIN Council meetings

21–22 November 2020

Meeting of G20 finance ministers and central bank governors in Riyadh, Saudi Arabia

30 November–1 December 2020

Eurogroup and ECOFIN Council meetings

Due to the coronavirus pandemic, dates and the format of meetings will be specified at short notice prior to the respective meetings.