By Andreas Kissler

    BERLIN (Dow Jones) — In August 2022, German tax revenue was 2.6 percent below the level of the same month last year, after having increased slightly in the previous month. This was announced by the Federal Ministry of Finance in its monthly report. In July and August, the tax relief measures that were decided due to the high level of energy prices, such as a child bonus, an increase in the basic allowance and lump sum for employees, and the temporary reduction in energy tax led to a reduction in income, according to the information provided.

    Community tax revenue fell 1.4 percent in August. Both income tax and taxes on turnover showed only slight increases in revenue in August. A weak development in wage tax with an increase of 1.7 percent was due, among other things, to the effects of the 2022 Tax Relief Act. The other community taxes would have recorded a drop in revenue. Federal tax revenue fell 12.3 percent, including energy tax revenue, which fell 33.2 percent.

    In August, the federal government booked 2.2 percent less tax revenue and reached 21.8 billion euros. The federal states received 25.5 billion euros in taxes, 3.9 percent less. In total, tax revenue in August amounted to around 54.2 billion euros. As early as July, as a result of relief measures taken by the federal government, tax revenue had risen by 0.3 percent, a much lower rate than in the previous months.

    In the first eight months of the year, tax revenue increased by 12.8 percent to 522.3 billion euros. The federal and state governments each recorded an increase of 14.1 percent. The noticeable plus is partly due to the weak basis for comparison in 2021, especially in the first half of the year, as a result of the economic effects of the coronavirus pandemic and the tax measures taken in connection with it.

    Economic outlook much worse

    With regard to further economic development, the ministry’s economists said that the outlook for the second half of the year had “deteriorated significantly in view of the almost complete suspension of gas supplies from Russia and the extraordinarily high energy prices”. Both have weighed on economic events and significantly increased the uncertainty about further economic development. To counteract this, the coalition parties agreed on a third relief package at the beginning of September.

    “It is to be expected that the high energy prices will gradually be passed on to end consumers and thus dampen private consumption,” emphasized the ministry. In addition, the energy-intensive industry in particular is likely to be burdened by the high energy prices, with negative repercussions on production. In addition to energy prices, ongoing disruptions in supply chains are also having a negative impact on economic development. The high level of uncertainty and the clouded outlook were particularly evident in the leading economic indicators.

    In the first half of the year, however, the German economy “defied the adverse circumstances” – real gross domestic product grew by 0.1 percent in the second quarter compared to the previous quarter, after an increase of 0.8 percent in the first quarter. Growth impetus came primarily from private and government consumption. “Construction investments and foreign trade, on the other hand, had a dampening effect,” stated the Ministry of Finance.

    With regard to the development of inflation, the ministry explained that after the inflation rate had risen again from a sharply increased level to 7.9 percent in August, September was “in view of the development of energy prices and the end of the reduction in energy tax on fuel and the 9-euro ticket with a further increase to be expected”. From October, the levying of the gas surcharge will have an inflation-increasing effect, although this will be dampened by the reduction in the sales tax rate on natural gas.

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    DJG/ank/hab

    (END) Dow Jones Newswires

    September 21, 2022 18:00 ET (22:00 GMT)

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