BERLIN (Dow Jones) — German tax revenue increased by 26.3 percent in June compared to the same month last year. In its most recent monthly report, the Federal Ministry of Finance attributed the increase mainly to the plus of 29.6 percent in community taxes.
So far, tax receipts this year are well above the estimates for the plus for the year as a whole and could therefore increase the pressure for further government relief due to the high inflation. In the months from January to June, general government tax revenues increased by 17.5 percent to 407.87 billion euros, more than double the tax increase of 7.4 percent that tax advisors had forecast for 2022 in May.
Boost from sales taxes and dividends
According to the Ministry of Finance, almost half of the additional revenue in June came from sales taxes. Import sales tax in particular rose significantly due to posting changes at the cash register. The significant increase in dividend payments led to a strong increase in income from non-assessed income taxes in June.
Corporate income tax and assessed income tax posted significant gains, particularly due to advance payments due this month, according to the Treasury Department. The robust labor market ensured a strong increase in wage tax receipts, which rose by 13.7 percent in June.
State taxes rose 10.0 percent year-on-year in May and 9.9 percent in April.
The federal government alone was able to record a tax increase of 15.1 percent to 37.23 billion euros in June. In the first half of the year, the tax revenue of the federal government even rose by 19.9 percent to 167.43 billion euros compared to the same period last year.
The tax increase for the federal states was 37.1 percent in June and 19.5 percent for the period from January to June. Overall, tax revenue in June was around 46.31 billion euros and 192.93 billion in the first half of the year.
Russian war of aggression weakens economic recovery
In their assessment of the economic situation, finance ministry economists pointed to the ongoing burden of the Russian war of aggression in Ukraine. Inflation in particular is leaving its mark.
There are still economic upswings in the German economy, which could result from the full order books of industrial companies and catch-up effects in consumption caused by the pandemic, especially in the service sector. The positive labor market development is also having a supportive effect on private demand.
“However, significantly increased price pressure this year, especially in the area of energy goods, but also persistent supply bottlenecks and increased uncertainty are likely to dampen the economic recovery,” according to the monthly report. However, the state could not “compensate for all the negative economic consequences of the war,” the economists warned. “It is also important not to create any additional price pressure.”
The ministry emphasized that due to the current burdens, leading German economic research institutes and national and international organizations have revised their forecasts for German economic growth downwards this year.
According to the economists, a complete halt to the supply of natural gas from Russia represents “a serious risk” which, if it were to occur, could result in the development of German gross domestic product being “significantly weaker and the rise in consumer prices even greater”.
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(END) Dow Jones Newswires
July 20, 2022 18:00 ET (22:00 GMT)