By Andrea Thomas
BERLIN (Dow Jones)–German tax revenues rose by 13.3 percent in September, continuing their upward trend from previous months. The Federal Ministry of Finance announced this in its monthly report. The reason for the increase was special effects in the income tax as well as a sharp increase in revenue from the withholding tax on interest and sales income. According to the Ministry of Finance, the outlook for the short-term economic development of the German economy remains subdued.
Payroll tax revenue rose by around 125 percent year-on-year in September, as the previous year’s payment of the energy price flat rate had reduced tax revenue in this area, as the ministry explained.
The federal government alone saw 16.3 percent more tax revenue in September and achieved revenue of 35.1 billion euros. The federal states collected 10.5 percent more in taxes at 36.6 billion euros. Overall, tax revenue in September amounted to around 80.6 billion euros, an increase of 13.3 percent. Tax revenue also increased in August and July.
In the first nine months of the year, tax revenue increased by a total of 2.5 percent to 608.5 billion euros. In May, tax estimators had predicted a tax increase of 2.9 percent for the year as a whole. They will release their new estimate on Thursday.
The federal government alone recorded an increase of 7.2 percent from January to September. Tax revenue for the federal states fell slightly by 0.5 percent compared to the same period last year.
Subdued economic outlook
Overall, the short-term economic outlook remains “noticeably cloudy” given the survey-based leading indicators, according to the monthly report. In principle, uncertainty about future economic development remains significantly increased. “There are downside risks, particularly with regard to geopolitical conflicts,” said the Treasury Department.
According to economists, the German economy slowed down in the third quarter. The ministry referred to German exports of goods, which suffered a noticeable setback in August for the second time in a row as a result of a slowing global economy. Domestic demand is also subdued. “Imports of goods have recently continued to decline. Declining sales in the hospitality and retail sectors reflect ongoing consumer reluctance among private households,” writes the ministry in its monthly report.
The weak economic development is also leaving its mark on the fundamentally robust labor market. Unemployment rose slightly again in September, adjusted for seasonal effects. However, employment is at a historically high level.
In view of the inflation rate, which fell significantly to 4.5 percent in September due to base effects, the ministry expects further falling rates. In view of the development of prices at the upstream economic levels (import prices, producer prices) and the declining price expectations of companies for the coming months, “a further gradual decline in inflation can be expected,” according to the ministry.
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(END) Dow Jones Newswires
October 19, 2023 6:00 p.m. ET (10:00 p.m. GMT)