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21 March 2023

Overview of federal budgetary and financial data up to and including February 2023

Translated extracts from the Federal Ministry of Finance’s March 2023 monthly report

Federal budget trends in February 2023

Table: Trends in the federal budget

Expenditure (€bn)²

480.7

476.3

83.1

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

 

 

+4.2

Revenue (€bn)³

364.7

389.9

52.4

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

 

 

+2.7

Tax revenue (€bn)

337.2

358.1

49.0

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

 

 

+2.8

Balance of pass-through funds (€bn)

0.0

0.0

0.0

Fiscal balance (€bn)

-116.0

-86.4

-30.7

Financing/use of surplus:

116.0

86.4

30.7

Cash resources (€bn)

-

-

243.8

Seigniorage (€bn)

0.1

0.2

0.0

Movements in reserves⁴ (€bn)

0.5

40.5

0.0

Net borrowing⁵ (€bn)

115.4

45.6

-213.1

Any discrepancies in totals are due to rounding.
¹ As per accounts.
² 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.
³ 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.
⁴ Negative values denote accumulation of reserves.
⁵ (-) debt repayment; (+) borrowing
Source: Federal Ministry of Finance

Actual 2022

2023 target

Actual February 2023¹

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Revenue

Federal revenue in the first two months of 2023 totalled approximately €52.4bn, up by 2.7% (about €1.4bn) on the year. This increase was driven by higher tax revenues, which grew by 2.8% on the year. Further information on tax revenues is provided in the article “Tax revenues in February 2023” [in German only] in the current edition of the monthly report.

The category of “other income” recorded a year-on-year gain of 1.2% in February 2023. Although receipts from EU Structural Fund contributions declined (by €0.2bn), this was offset by higher interest revenue from the Federation’s cash management system (up by €0.1bn) and higher fee proceeds and other income from foreign guarantees (up by €0.1bn).

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Expenditure

Federal expenditure in the first two months of 2023 totalled approximately €83.1bn, up by 4.2% (about €3.3bn) on the year. A breakdown by economic category shows that the increase in expenditure was driven by investment spending, which was 107.0% (about €5.7bn) higher than in February 2022. This extraordinary increase is mainly due to a special factor: a roughly €6.3bn loan that was granted to the IMF’s Resilience and Sustainability Trust in January 2023 was recorded as an investment item, as required under budget law. After adjusting for this effect, investment spending was down by 11.0% (€0.6bn) on the year. This outcome can be attributed to a decline in liquidity assistance to the Federal Employment Agency, which was down by roughly €1.1bn on the year. Fixed asset investment remained basically unchanged year-on-year.

Consumption spending was down by approximately 3.2% (about €2.4bn) on the year in the first two months of 2023. There were several contrasting trends overall. Due to the general increase in interest rates, interest expenditure rose by 122.9% (about €4.1bn). In contrast, ongoing grants and subsidies declined by 13.0% (about €7.7bn), mainly because much less funding had to be made available to combat the adverse effects of the COVID-19 pandemic. For example, federal payments to the health fund to cover pandemic-related costs declined by about €5.7bn, to €0.6bn. No pandemic-related compensation payments under section 21 of the Hospital Financing Act (Krankenhausfinanzierungsgesetz) were made in the first two months of 2023 (compared with €2.3bn in compensation payments during the same period last year). Pandemic-related assistance to businesses totalled roughly €100m, down by about €1.4bn on the year.

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Fiscal balance

The federal budget recorded a deficit of approximately €30.7bn for the January–February 2023 period.

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 is especially true towards the start 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 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 February 2023

2023 trends in tax revenue (excluding local authority taxes)

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Total tax revenue (excluding local authority taxes) was down by 4.1% on the year in February 2023. This outcome was due mainly to a 4.2% decline in receipts from joint taxes, which was driven largely by (a) tax relief measures under the Inflation Compensation Act (Inflationsausgleichsgesetz) including an increase in the basic personal allowance and a change in tax bracket thresholds and (b) a temporary reduction in VAT rates on gas and district heating. The negative figure for February was also slightly inflated by an accounting effect related to import VAT. Receipts from taxes accruing to the Federation climbed by 5.7% on the year, particularly due to higher revenue from insurance tax and tobacco duty. Revenue from taxes accruing to the Länder was down by 28.2% on the year, mainly due to downwards trends in receipts from real property transfer tax and inheritance tax, the two highest-yielding Länder taxes.

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EU own resources

Transfers of own resources to the EU, including customs duties, were 10.1% lower in February 2023 than in the same month of 2022. In general, monthly requisitions are based on the annual EU budget that is in force for the respective year and are distributed relatively evenly across individual months. However, there can sometimes be substantial year-on-year fluctuations in individual months.

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Overview of the January–February 2023 period

In the first two months of 2023, total tax receipts were down by 1.8% on the year. Revenue from joint taxes declined by 1.0%. Receipts from taxes accruing solely to the Federation rose by 2.8%, while receipts from taxes accruing solely to the Länder contracted by 23.6%.

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Distribution among the Federation, Länder and local authorities

The Federation’s tax receipts (after accounting for supplementary federal grants that, under the fiscal equalisation system, are paid from the Federation’s revenues to Länder with below-average capacity) remained basically unchanged on the year in February 2023 (up by 0.04%). The Federation’s take from joint taxes fell by 3.1% on the year; this was less than the drop in overall revenue from joint taxes, which was down by 4.2%. This discrepancy is due to the fact that the Federation’s receipts from its share of VAT revenue fell by 3.0%, while overall VAT revenue posted a larger decline of 4.3%. The lower rate of decline in federal VAT receipts stems from the way fixed payments are handled in the vertical distribution of revenue from the Federation to the Länder (for more, see the article on January 2023 tax revenues [in German only] in the February 2023 edition of the monthly report).

Revenue from taxes accruing solely to the Federation was up by 5.7% on the year. Federal transfers of own resources to the EU were lower than in February 2022 (see above). In contrast, the Federation paid higher amounts of (a) supplementary grants and (b) public transport subsidies to the Länder.

Länder tax receipts posted a year-on-year decline of 6.7% in February 2023. Mirroring the Federation’s revenue trends, the rate of decline in Länder VAT revenue (down by 5.7%) was higher than the rate of decline in overall VAT revenue. Total Länder receipts from joint taxes were down by 4.6% on the year. In addition, the yield from taxes that accrue exclusively to the Länder posted a sharp decline of 28.2%. In contrast, Länder revenue from federal subsidies for public transport was 7.9% higher on the year. The Länder also saw an 11.5% increase in receipts from supplementary federal grants.

Local authorities’ take from their share of joint taxes was down by 8.1% on the year, while their receipts from value added taxes declined by 3.2%.

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Joint taxes

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Wages tax

Gross revenue from wages tax was down by 0.2% on the year in February 2023. This decline was mainly the result of extensive tax relief measures. For example, in order to offset bracket creep, the basic personal allowance was increased as of 1 January 2023 and tax bracket thresholds were adjusted. These measures were taken on the basis of the Inflation Compensation Act. In addition, under the 2022 Annual Tax Act (Jahressteuergesetz 2022), pension contributions are fully deductible as special expenses from 2023 onwards. February cash receipts from wages tax stem mainly from taxes on wages paid in January, which means that the above tax relief measures first had an impact on revenue figures for February. In addition, the Inflation Compensation Act increased child benefit payments starting on 1 January 2023. As a result, child benefit payments – which are subtracted from gross wages tax revenue – posted a year-on-year increase of 13.4% in February. On balance, cash receipts from wages tax were down by 3.0% on the year in February 2023. Given the extensive tax relief measures and higher child benefit payments, this rate of decline was relatively low thanks to trends on the labour market, which remained stable despite the headwinds facing the overall economy (for more, see the article on economic trends [in German only] in the current edition of the monthly report). In cumulative terms, cash receipts from wages tax were up by 0.8% on the year in the first two months of 2023.

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Corporation tax

Gross corporation tax revenue in the month of February is derived mainly from the revenue administration’s assessment activities and was up by 4.0% on the year in February 2023. Research and investment allowance payments, which are financed from corporation tax receipts, totalled approximately €25.4m in February. Research allowance payments were up by about €18.9m over the same month last year. On balance, cash receipts from corporation tax declined by 2.3% on the year in February 2023. In cumulative terms, cash receipts from corporation tax were down by 36.1% on the year in the first two months of 2023.

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Assessed income tax

Gross receipts from assessed income tax declined by 38.9% on the year in February 2023. Employee refunds (which are subtracted from the gross figure) were up by 23.2% on the year. 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. On balance, cash receipts from assessed income tax fell by 62.7% on the year in February 2023. As is the case with corporation tax, gross revenue from assessed income tax in the month of February is derived mainly from assessment activity. Taken cumulatively, cash receipts from assessed income tax were down by 26.4% on the year in the first two months of 2023. March is the first month in 2023 when prepayments are due.

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Non-assessed taxes on earnings

Gross receipts from non-assessed taxes on earnings were up by 105.9% in February 2023, mainly due to a one-off effect. Refunds by the Federal Central Tax Office, which are financed from gross revenue, totalled about €29m (down by 61.4% on the year). Overall, cash receipts from non-assessed taxes on earnings grew by 118.7% on the year in February 2023. Cumulatively, cash receipts from non-assessed taxes on earnings were up by 31.2% on the year in the first two months of 2023.

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Final withholding tax on interest and capital gains

Revenue from final withholding tax on interest and capital gains was down by 56.3% on the year in February 2023. In recent years, receipts from this tax are derived mostly from the taxation of capital gains, and this can involve major fluctuations. In cumulative terms, cash receipts from final withholding tax on interest and capital gains were down by 36.5% on the year in the first two months of 2023.

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Value added taxes

Revenue from value added taxes was down by 4.3% on the year in February 2023. Receipts from domestic VAT and import VAT recorded year-on-year declines of 4.3% and 4.2%, respectively. In February of both 2022 and 2023, some revenue from import VAT was shifted into March, because the due date for paying import VAT (the 26th of each month) leaves at most only a few working days to process payments in February. It is likely that the revenue shift was greater in 2023 than in 2022; adjusting for these shifts would show a year-on-year increase in import VAT receipts in February 2023. However, this increase would still be lower than the revenue growth rates in the second half of 2022, which is consistent with the weak trends in nominal imports of goods (due among other things to prices). Furthermore, the temporarily reduced VAT rate on gas and district heating (from 1 October 2022 until 31 March 2024) had a noticeable downwards impact on year-on-year figures for domestic VAT in February 2023. The retail sector has also been very subdued in recent months due to high rates of inflation, and this too has had an impact on VAT revenue trends. Cumulatively, cash receipts from value added taxes were up by 0.2% on the year in the first two months of 2023.

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Taxes accruing to the Federation

Revenue from taxes accruing solely to the Federation was up by 5.7% on the year in February 2023. Energy duty receipts were down on the year by 10.8%. Other taxes posting year-on-year declines included motor vehicle tax (down by 3.3%), alcohol duty (down by 2.0%) and sparkling wine duty (down by 2.5%). In contrast, tobacco duty recorded a year-on-year gain of 19.0%. Receipts from the solidarity surcharge climbed by 6.7%. This was mainly due to an increase in revenue from the solidarity surcharge on non-assessed taxes on earnings; conversely, revenue from the solidarity surcharge on wages tax was down as a result of tax relief measures. Other taxes posting revenue gains included insurance tax (up by 9.1%) and aviation tax (up by 134.3%). The high growth rate for aviation tax revenue reflects the low baseline from February 2022, when the effects of the pandemic were still strong. Trends in revenue from other taxes had only a minor impact on 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 28.2% on the year in February 2023, mainly due to declines in revenue from real property transfer tax (down by 38.9%) and inheritance tax (down by 18.7%). In the case of real property transfer tax, the distinctly negative revenue trend probably reflects the weakening of the real estate market as a result of the sharp rise in construction prices and less favourable financing conditions. Länder taxes posting year-on-year revenue gains included betting and lottery tax (up by 2.6%), beer duty (up by 6.2%), and fire protection tax (up by 3.7%).

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Borrowing and guarantees

Borrowing trends for the Federation in February 2023

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Borrowing trends for the Federation (budget and special funds, excluding loan financing) in February 2023

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Guarantees

  

Authorised amount

Amount allocated as of
31 December 2022

Amount allocated as of
31 December 2021

in €bn

Export credit guarantees

150.0

119.1

128.0

Loans to foreign debtors, foreign direct investment, EIB loans

60.0

39.7

35.1

Financial cooperation projects

37.0

31.5

29.0

Food stockpiling

0.7

0.0

0.0

Domestic guarantees

550.0

346.6

273.0

International financial institutions

90.0

75.5

75.5

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 and fiscal data

April 2023 issue

March 2023

21 April 2023

May 2023 issue

April 2023

19 May 2023

June 2023 issue

May 2023

22 June 2023

July 2023 issue

June 2023

20 July 2023

August 2023 issue

July 2023

24 August 2023

September 2023 issue

August 2023

21 September 2023

October 2023 issue

September 2023

20 October 2023

November 2023 issue

October 2023

21 November 2023

December 2023 issue

November 2023

21 December 2023

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

12–14 April 2023

Spring meetings of the IMF and World Bank in Washington, D.C., USA

12–13 April 2023

Meeting of G20 finance ministers and central bank governors on the sidelines of the IMF/World Bank spring meetings in Washington, D.C., USA

28–29 April 2023

Eurogroup and informal ECOFIN meetings in Stockholm, Sweden

15–16 May 2023

Eurogroup and ECOFIN Council meetings in Brussels, Belgium

15–16 June 2023

Eurogroup and ECOFIN Council meetings in Luxembourg

13–14 July 2023

Eurogroup and ECOFIN Council meetings in Brussels, Belgium

3–4 August 2023

Meeting of G20 finance ministers and central bank governors in Gandhinagar, India