Tax receipts fall in December

By Andreas Kissler

BERLIN (Dow Jones) — German tax revenues fell by 2.4 percent in December 2022 after rising in previous months. This was announced by the Federal Ministry of Finance. “However, a special factor in the import sales tax made a significant contribution to the minus,” the ministry explained in its monthly report. Here, the previous year’s value was significantly higher due to a checkout effect.

Accordingly, in addition to sales taxes, where the temporary reduction in the sales tax rate on gas and district heating had the effect of reducing revenue in addition to the special effect of import sales tax, there were also declines in income, as well as the non-assessed income taxes and the withholding tax on interest and sales income. According to the Ministry of Finance, this was offset by increases in revenue, especially from income tax and corporate income tax.

In December, the federal government posted 11.2 percent less tax revenue and reached 47.0 billion euros. The federal states, on the other hand, took in 4.0 percent more taxes at 51.1 billion euros. Overall, tax revenue in December amounted to almost 108.9 billion euros. In November, tax revenue had grown by 2.0 percent compared to the previous year and by 6.1 percent in October.

In 2022 as a whole, tax revenue increased by 7.1 percent to 814.9 billion euros. The federal government recorded an increase of 7.5 percent and the federal states recorded an increase of 8.3 percent. According to the information, the increase in 2022 was partly due to the comparative basis for 2021, which was still weak in the first half of 2022, as a result of the economic effects of the corona pandemic and the tax measures taken. Total tax revenue in the first half of the year rose by 17.5 percent compared to the same period of the previous year. In the second half of the year, tax relief, such as the 2022 Tax Relief Act or the Energy Tax Reduction Act, had the effect of reducing income.

Economic slowdown probably shorter and milder

With regard to the development of the economy, the ministry explained that with the growth of 1.9 percent reported by the Federal Statistical Office in 2002, the German economy was able to “defy the difficult framework conditions even better” than had been assumed in the meantime. “The increase was noticeably above the expectations of the economic forecasts published in autumn.” The slowdown in overall economic momentum is likely to be “shorter and milder than expected in autumn” thanks to massive government stabilization measures and their adjustments to the high energy prices and the associated gas savings.

According to the ministry, over the course of 2022, the price, calendar and seasonally adjusted rates of change in gross domestic product (GDP) were 0.8 percent in the first quarter, 0.1 percent in the second and 0.4 percent in the third quarter. “Given the burden of high energy prices and inflation rates, GDP is likely to have remained roughly unchanged at the end of the year,” predicted the economic experts of Finance Minister Christian Lindner (FDP).

With regard to the development of inflation, the ministry’s economists explained that the high core inflation also reflects the ongoing transmission of the sharp rise in producer prices over the course of the year, especially for energy goods. “Therefore, at the beginning of 2023, we can still expect significantly higher inflation rates,” they stated. At the same time, the prices for energy and especially gas on the European markets have fallen significantly in recent months.

In addition, the gas and electricity price brakes had a dampening effect on the development of consumer energy prices in the current year. Base effects from the strong price increases after the start of the Ukraine war petered out over the next few months. Overall, “according to current estimates, inflation rates can be expected to decrease again in the further course of 2023”.

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(END) Dow Jones Newswires

January 26, 2023 18:00 ET (23:00 GMT)