BERLIN (Dow Jones)–Due to a one-off effect, German tax revenue fell by 7.3 percent in June, halting the positive development of the previous month. This was announced by the Federal Ministry of Finance in its monthly report.
“However, the minus compared to the same month last year is clearly exaggerated by a special revenue-increasing effect from the import sales tax of the previous year,” the ministry said. According to the ministry, without this special effect, the decline in tax revenue would total around 3.5 percent.
Another reason for the lower tax revenue is the tax relief, such as the Inflation Compensation Act to avoid so-called cold progression.
However, the federal government alone posted 3.1 percent more tax revenue in June, reaching 38.37 billion euros. At 38.73 billion euros, the federal states took 16.4 percent less in taxes. According to the ministry, the decline in revenue from state taxes, which has been ongoing since the second half of 2022, has continued here. For example, the real estate transfer tax “continues to show a noticeable decline” in revenue by 33 percent compared to the previous year, according to the monthly report.
Overall, tax revenue in June amounted to around 86.39 billion euros. In May, tax revenue rose by 8.5 percent year-on-year, fell by 4.6 percent in April and fell by 1.5 percent in March.
In the first six months of the year, tax revenue fell by 2.0 percent to 399.76 billion euros. While the federal government posted growth of 2.3 percent from January to June, the federal states received 5.1 percent less in taxes.
No noticeable economic growth in the second quarter
With regard to the economy, according to the Ministry of Finance, the available indicators paint a cautious picture. “All in all, it cannot currently be assumed that there will be a noticeable increase in economic activity in the second quarter of 2023 compared to the winter half-year,” explained the ministry’s economists.
They referred to production in the manufacturing sector, which in May did not recover further from the setback in March and fell slightly compared to the previous month. Imports, on the other hand, increased again in May, while exports probably stagnated in price-adjusted terms.
In the retail trade, sales increased moderately in May, but even if the level remained constant in June, only a slight increase would be recorded overall in the second quarter, according to economists’ estimates. Overall, this also has consequences for the labor market.
“The economic weakness is also leaving its mark on the labor market, even if the initial situation there continues to be very robust,” says the monthly report.
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(END) Dow Jones Newswires
July 19, 2023 18:00 ET (22:00 GMT)