In 2024, the German state will be taking significantly fewer taxes than expected

Status: 05/11/2023 4:12 p.m

Contrary to expectations, according to one estimate, the federal, state and local governments will collect significantly less taxes in 2024. The reason for this is above all the inflation compensation for consumers, as Finance Minister Lindner announced.

The federal, state and local governments will probably have to make do with less tax revenue in the coming year than was assumed in the autumn. The tax estimators are assuming that 30.8 billion euros less will flow into the coffers than expected, as Federal Finance Minister Christian Lindner announced. Overall, they expect revenues of 962.2 billion euros for 2024.

The main reason for the minus is the adjustment for inflation in income tax, which was decided according to the last estimate. “The federal government is keeping its promise that the state will not enrich itself from inflation,” said Lindner. The results of the tax estimate are evidence that the Inflation Compensation Act and the Annual Tax Act are having an effect. “We give back around 34 billion euros annually to people and companies in the estimated period.”

Next year around 377 billion euros for the federal government

The estimation period covers the years up to 2027 – here the estimators forecast an average of around 30 billion euros less income than last time. For the federal, state and local governments, the new tax estimate results in a total loss of 148.7 billion euros by 2027.

According to the forecast, the federal government itself will have around 377.3 billion euros at its disposal in the coming year. This means that Lindner has 13 billion less leeway in its budget for 2024 – the hoped-for relaxation of the budget dispute that has been deadlocked in the federal government for months does not materialize. The gap in the budget for next year is around 20 billion euros.

Among other things, additional costs due to the collective bargaining agreement in the public sector and higher interest rates must be compensated. Lindner emphasized that this gap had to be created by doing without. “We can only spend what the people and businesses in this country make,” he said. “We all have to face this budgetary reality.”

Finance Minister Lindner announced on Thursday what the federal, state and local governments can expect in terms of tax revenue up to 2028.
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No leeway with the wishes of the traffic light partners

Lindner insists on complying with the debt brake prescribed in the Basic Law again next year. On the other hand, he also rules out tax increases to further increase income. His calculation will therefore only work out if some of his fellow ministers refrain from spending and making wishes. Coalition partners SPD and Greens also demanded several billions for their ministries – for example for a hospital reform, the armed forces and basic child security for needy families.

Because of the disagreements in the traffic light coalition, the Minister of Finance had completely dispensed with the submission of the otherwise usual key budget figures. Lindner had now again postponed the initially targeted date for the presentation of the government draft in the cabinet. He will only give the plans for 2024 to the ministerial round after June 21, said the FDP leader on the way to the meeting of G7 finance ministers in Niigata, Japan. After that, it’s the turn of the Bundestag, which wants to decide on the budget at the beginning of December.

The tax assessment working group meets twice a year, in spring and autumn. The committee consists of experts from the Federal Government, the leading economic research institutes, the Federal Statistical Office, the Bundesbank, the Council of Experts for the Assessment of Macroeconomic Development in Germany as well as representatives of the state finance ministries and the municipalities.

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