Federal budget trends in September 2021

Table: Trends in the federal budget

Expenditure (€bn)³

441.8

547.7

366.4

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

 

 

+23.9

Revenue (€bn)⁴

311.1

307.3

233.1

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

 

 

+4.4

Tax revenue (€bn)

283.3

284.0

217.2

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

 

 

+7.0

Balance of pass-through funds (€bn)

0.0

0.0

0.0

Fiscal balance (€bn)

-130.7

-240.4

-133.3

Financing/use of surplus:

130.7

240.4

133.3

Cash resources (€bn)

-

-

70.2

Seigniorage (€bn)

0.2

0.2

0.2

Movements in reserves⁵ (€bn)

0

0.0

0.0

Net borrowing⁶ (€bn)

130.5

240.2

62.9

Any discrepancies in totals are due to rounding.
¹ Supplementary budget pursuant to the Act Adopting a Supplement to the Federal Budget for the 2021 Fiscal Year (Gesetz über die Feststellung eines Nachtrags zum Bundeshaushaltsplan für das Haushaltsjahr 2021) of 3 June 2021 (Federal Law Gazette I No 29, p. 1410).
² As per accounts.
³ With 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.
⁴ With the exception of revenue from loans on the credit market, withdrawals from reserves, revenue from cash surpluses and seigniorage. Excluding revenue from internal offsetting.
⁵ Negative values denote accumulation of reserves.
⁶ (-) debt repayment; (+) borrowing.
Source: Federal Ministry of Finance

Actual 2020

2021 target¹

Actual²
September 2021

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Revenue

Federal revenue for the period from January to September 2021 totalled approximately €233.1bn, up by 4.4% (about €9.8bn) on the year, but still about €22.7 below the figure for the same period in 2019. Tax receipts (taking into account transfers of own resources to the EU) in the first nine months of the year were up by 7.0% (about €14.3bn) on the year. Revenue from income tax and corporation tax rose by 15.9% (about €15.4bn), while the yield from value added taxes increased by 14.5% (about €10.5bn) on the year. Revenue from the solidarity surcharge was down by 40.5% (about €5.5bn), largely due to the abolition this year of the solidarity surcharge for approximately 90% of wages tax and income tax payers. Tax revenue growth was also tempered by the trend in payments to the EU (GNI-based own resources and VAT-based own resources), which were up by about €7.8bn on the year.

The category of “other revenue” was down by 22.1% (about €4.5bn) on the year in the January–September period. This was mainly due to the fact that the Federation’s share (€2.5bn) of the Bundesbank’s net profits was not remitted. Fines collected by the Federal Cartel Office were also down by about €0.8bn on the year. Furthermore, the figures for the period reflect the absence of dividend payments by Deutsche Bahn. In 2020, Deutsche Bahn paid the Federation a dividend of €650m.

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Expenditure

Measures to counteract the Covid-19 pandemic and its effects are having a significant impact on budget execution in 2021. Federal expenditure in the first nine months of 2021 totalled approximately €366.4bn, up by 23.9% (about €70.6bn) on the year. A breakdown by economic category shows that higher spending in the January–September period was driven mainly by consumption spending, which was up by 20.8% (about €56.4bn). Ongoing grants to public administrations and social security funds, along with subsidies to businesses, accounted for most of this increase. Grants to public administrations rose by 61.0% (about €18.8bn), due mainly to a €16.0bn grant that was allocated to the special fund for reconstruction aid (Aufbauhilfe 2021) in September 2021. Subsidies to businesses climbed by 46.1% (about €17.1bn) on the year. Most of this increase consisted of assistance to businesses affected by the fallout from the coronavirus pandemic. About €31.2bn of the funds earmarked for this purpose were disbursed by 30 September 2021. Grants to social security funds were up by 15.6% (about €16.9bn) on the year in the first three quarters of 2021. This includes a €12.2bn year-on-year increase in disbursements to the health fund to cover pandemic-related costs. These grants also include €3.0bn in disbursements to the health fund’s liquidity reserves for a programme to future-proof hospitals, which was established this year; this is the full amount that was budgeted for this purpose.

Investment spending in the first nine months of 2021 totalled €39.5bn, an increase of 56.4% (about €14.2bn) over the same period last year. The main factor driving this increase was liquidity assistance provided to the Federal Employment Agency, which was booked in the form of loans and increased by approximately €13.0bn on the year. In contrast, fixed asset investment was down by 47.3% (about €3.4bn) due to a decline in spending on construction projects. The year-on-year decline in construction spending is due mainly to a special factor that will affect the entire year: since the beginning of 2021, investments in trunk road construction have been outsourced to Autobahn GmbH des Bundes (Federal Autobahn GmbH). The necessary funds are being provided to Autobahn GmbH des Bundes in the form of investment grants, which rose by approximately €2.4bn on the year in September 2021. Approximately €5.5bn has been earmarked for these investment grants in 2021. As a result, about €4.7bn less has been budgeted for construction investment in 2021 than in 2020 (and about €4.2bn less than the amount that was actually spent on construction investment in 2020).

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Fiscal balance

The federal budget recorded a deficit of €133.3bn for the period from January to September 2021.

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.

Trends in federal expenditure by function

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Trends in federal expenditure by economic category

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Trends in federal revenue

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Tax revenue in September 2021

2021 trends in tax revenue (excluding local authority taxes)

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Trend in September 2021

Total tax revenue (excluding local authority taxes) was up by 23.1% on the year in September 2021. This increase was largely due to higher revenue from joint taxes, which rose by 28.6% on the year. The strong growth in revenue from wages tax and value added taxes must be viewed in light of the very low baseline from the previous year. Tax revenue in September of last year was significantly lower due to (a) revenue shortfalls caused by the coronavirus crisis and (b) measures adopted as part of the Second Coronavirus Tax Assistance Act (Zweites Corona-Steuerhilfegesetz). Wages tax revenue in that month reflected payments of a one-time bonus for families with children (child bonus), and VAT revenue was significantly reduced by the temporary cut in VAT rates in the second half of 2020. Revenue trends for assessed income tax and corporation tax were also very positive in September 2021, due in particular to major increases in prepayments. Revenue from taxes accruing solely to the Federation was down by 4.2% on the year in September, while receipts from taxes accruing to the Länder rose by 7.2%.

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EU own resources

Transfers of own resources to the EU, including customs duties, were up by roughly €1.2bn (56.1%) on the year in September 2021. Drawdowns of GNI- and VAT-based own resources were higher than in the same month of 2020 due to the settlement of Germany’s contribution to the EU’s amending budget no 2/2021 (including financing for measures in connection with the Covid-19 pandemic and adjustments following the final adoption of the multiannual financial framework). In general, monthly requisitions are based on the annual EU budget that is in force for the respective year.

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Cumulative overview of the January–September 2021 period

In the nine months from January to September 2021, total tax receipts (excluding local authority taxes) were up by 9.1% over the same period in 2020. Revenue from joint taxes rose by 12.1%, while receipts from taxes accruing solely to the Federation fell by 7.5%. Revenue from taxes accruing solely to the Länder grew by 12.0%.

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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) were up by 19.9% on the year in September 2021. The Federation’s take from joint taxes grew by 33.0%. This was higher than the increase in overall revenue from joint taxes, which was up by 28.6%. This discrepancy is due to the fact that the Federation’s share of VAT revenue increased by 32.2%, even though overall VAT revenue was up by only 21.3%. Under section 1 (1) of the Fiscal Equalisation Act (Finanzausgleichgesetz), the Federation receives 52.81% of overall VAT revenue. This share is reduced by annual fixed amounts that the Federation allocates to the Länder and local authorities. Because the amounts of these allocations are fixed for a given year, this means that when VAT revenue goes up, the Federation’s share of VAT revenue goes up as well. Furthermore, the fixed amount that the Federation paid to the Länder in September 2021 was lower than the amount it paid in September 2020. Revenue from taxes accruing solely to the Federation were down by 4.2%. Transfers of own resources to the EU and supplementary federal grants to the Länder were both up sharply.

Länder tax receipts surged by 23.7% on the year in September 2021. Due to the above-described mechanism for distributing VAT revenue, the Länder posted lower rates of growth for VAT revenue (+15.4%) and revenue from joint taxes (+26.0%) than the Federation. The yield from taxes that accrue exclusively to the Länder posted a robust gain of 7.2%. In addition, supplementary federal grants to the Länder increased by 48.8% on the year, and federal subsidies to the Länder for public transport rose by 3.5%. Local authorities’ take from their share of joint taxes was 23.0% higher than in the same period last year.

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Joint taxes

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Wages tax

Gross revenue from wages tax was up by 5.8% on the year in September, despite the reductions in revenue caused by tax relief measures for taxpayers in the current year (i.e. the increase in the basic personal allowance and the related shift in the other tax thresholds). This upward trend reflects the improvement in conditions on the labour market compared with last year.

Child benefit payments – which are financed from wages tax receipts – declined by 44.2% on the year. In September of last year, the disbursement of initial €200 instalments of the child bonus nearly doubled the overall amount of child benefit payments for that month.

Overall, cash receipts from wages tax posted a year-on-year gain of 33.6% in September. In cumulative terms, cash receipts from wages tax were up by 2.6% on the year in the first nine months of 2021.

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Corporation tax

Gross receipts from corporation tax were up by 54.4% in September (a month when prepayments are due). Prepayments were up by 38% over the figure for September 2020, when prepayments were significantly lower due to prepayment reductions granted as part of the tax measures to mitigate the effects of the pandemic. Thanks to the positive performance of the economy, prepayments were about 7% higher than the pre-crisis levels recorded in September 2019. The gross figure for corporation tax revenue was then modified to account for small outgoing payments of the tax allowance for research and small incoming repayments of investment allowance. On balance, these amounted to roughly €1.3m and thus had only a marginal impact on cash receipts from corporation tax. Cumulatively, cash receipts from corporation tax were up by 77.9% on the year in the first nine months of 2021.

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Assessed income tax

As in the case of corporation tax, September is a month when prepayments of assessed income tax are due. Overall, receipts from this tax rose by 17.3% on the year in September. Here too, prepayment reductions granted in the context of last year’s crisis mitigation measures had led to significantly lower prepayment totals in September 2020. Prepayments in September 2021 were thus up by about 16% on the year, and up by about 9% over the pre-crisis levels of September 2019. Employee refunds, which are subtracted from the gross figure, were 32.1% lower on the year in September. Investment allowance payments, research allowance payments and owner-occupied homes premiums, which are insignificant in terms of amount, are also subtracted from the gross figure. Altogether, cash receipts from assessed income tax posted a year-on-year gain of 20.5% in September 2021. In cumulative terms, cash receipts from assessed income tax were up by 17.1% on the year in the first nine months of 2021.

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Non-assessed taxes on earnings

Gross receipts from non-assessed taxes on earnings were up by 37.7% on the year in September 2021. Refunds by the Federal Central Tax Office, which are financed from gross revenue, totalled about €44m (down by 59.2% on the year). Overall, cash receipts from non-assessed taxes on earnings recorded a year-on-year gain of 48.1% in September 2021. Cumulatively, cash receipts from non-assessed taxes on earnings were up by 22.8% on the year in the first nine months of 2021.

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Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains was up by 71.7% on the year in September. Cumulative cash receipts from this tax were up by 45.6% on the year in the first nine months of 2021.

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Value added taxes

Revenue from value added taxes was up by 21.3% on the year in September 2021. Receipts from domestic VAT rose by 11.4%, while receipts from import VAT were up by 62.1%.

Companies are regularly granted permanent extensions for filing VAT returns and paying VAT. As a result, VAT revenue from July is not remitted by companies to the government until September. This means that, in 2020, September was the first month when the effects of the temporary reduction in VAT rates (which took effect on 1 July 2020) showed up in the cash statistics. Last year’s low baseline figure due to the VAT rate reduction accounts for the bulk of the revenue growth recorded in September 2021.

Cumulatively, cash receipts from value added taxes were up by 10.9% on the year in the first nine months of 2021.

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Taxes accruing to the Federation

In September 2021, revenue from taxes accruing solely to the Federation was down by 4.2% compared with the same month last year. Energy duty, motor vehicle tax and alcohol duty all posted significant declines in revenue, falling by 1.8%, 3.3% and 3.2%, respectively. Revenue from the solidarity surcharge was down by 28.6% on the year, a decline driven by the surcharge’s partial elimination from 1 January 2021 onwards. In contrast, revenue was up sharply in the case of insurance tax (+6.1%), tobacco duty (+10.5%) and aviation tax (+262.4%). The surge in aviation tax revenue indicates that air traffic at German airports is growing again following a sharp contraction during the coronavirus crisis, although it still remains far below pre-pandemic levels. Trends in revenue from other taxes had only a minor impact on overall receipts from federal taxes. In cumulative terms, cash receipts from taxes accruing solely to the Federation were down by 7.5% on the year in the January–September period.

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Taxes accruing to the Länder

Receipts from taxes accruing solely to the Länder were up by 7.2% on the year in September 2021. Taxes posting revenue gains included real property transfer tax (+22.3%), fire protection tax (+4.0%) and betting and lottery tax (+9.2%). Beer duty revenue was down by 28.2%, while inheritance tax revenue fell by 12.8%. In cumulative terms, cash receipts from taxes accruing solely to the Länder were up by a total of 12.0% on the year in the first nine months of 2021.

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Borrowing and guarantees

Borrowing trends for the Federation in September 2021

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Borrowing trends for the Federation (budget and special funds, excluding loan financing) in September 2021

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Borrowing trends for the Federation (loan financing) in September 2021

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Guarantees

 

Authorised amount

Amount allocated as of
30 September 2021

Amount allocated as of
30 September 2020

in €bn

Export credit guarantees

155.0

126.9

125.6

Loans to foreign debtors, foreign direct investment, EIB loans

75.0

35.7

40.6

Financial cooperation projects

35.0

31.9

28.6

Food stockpiling

0.7

0.0

0.0

Domestic guarantees

430.0

312.3

273.2

International financial institutions

110.0

68.6

68.6

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

November 2021 issue

October 2021

19 November 2021

December 2021 issue

November 2021

21 December 2021

January 2022 issue

December 2021

28 January 2022

February 2022 issue

January 2022

22 February 2022

March 2022 issue

February 2022

22 March 2022

April 2022 issue

March 2022

22 April 2022

May 2022 issue

April 2022

20 May 2022

June 2022 issue

May 2022

21 June 2022

July 2022 issue

June 2022

21 July 2022

August 2022 issue

July 2022

19 August 2022

September 2022 issue

August 2022

22 September 2022

October 2022 issue

September 2022

20 October 2022

November 2022 issue

October 2022

22 November 2022

December 2022 issue

November 2022

22 December 2022

¹ In 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
28 October 2021

Informal ECOFIN meeting (virtual)

29 October 2021

Joint Finance and Health Ministers’ Meeting in Rome

30–31 October 2021

G20 summit in Rome

8–9 November 2021

Eurogroup and ECOFIN Council meetings in Brussels

6–7 December 2021

Eurogroup and ECOFIN Council meetings in Brussels

17–18 January 2022

Eurogroup and ECOFIN Council meetings in Brussels

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