In September and August, the federal government’s relief packages lead to falling tax revenues. The downward trend can be stopped in October. According to the Ministry of Finance, the strong increase in income tax revenue and taxes on sales are decisive.
German tax revenue increased by 6.1 percent in October, ending the downward trend of the past two months. The Federal Ministry of Finance announced this in its monthly report. The revenue from community taxes rose by 9.7 percent. The main reason for this was the strong increase in wage tax revenue and sales taxes – here the import sales tax.
In October, the federal government booked 17.1 percent more tax revenue and reached 23.6 billion euros. According to the ministry, this was essentially due to a 15.6 percent increase in federal revenue from community taxes. In addition to the general increase in revenue from community taxes, a decrease in the fixed amounts to be paid to the federal states as part of the financial equalization system played a role. These were very high in October 2021 due to the compensation payments to the federal states and municipalities for loss of income from tax measures due to the Corona crisis.
At 26.5 billion euros, the federal states received 2.9 percent more taxes. In total, tax revenue in October amounted to around 56.7 billion euros. In September, on the other hand, tax revenue fell by 9.0 percent as a result of relief measures by the federal government and by 2.6 percent in August. In the first ten months of the year, tax revenue increased by a total of 9.3 percent to 650.1 billion euros. The federal government recorded an increase of 11.5 percent, and the states achieved a plus of 10.0 percent.
The ministry’s economists stated that, despite the increase in gross domestic product in the third quarter of 0.3 percent and thus a “surprisingly positive development”, the economic prospects remain gloomy. The forward-looking economic indicators such as the Ifo business climate or incoming orders “point to a significantly slower economic development in the coming months”.
Consumer sentiment also remains in the pessimistic range. However, with a high level of employment, the situation on the labor market is still fundamentally robust in the face of the overall economic burden. Despite the fact that short-time work is currently increasing again, no fundamental deterioration in the labor market is to be expected.