The tax estimation working group has been sitting together since Tuesday to determine the key figures for the federal government’s budgetary policy in the coming months: the expected development of tax revenue. This time, however, the work of the body, which has existed since 1955 and meets twice a year, is particularly complicated: In view of the war in Ukraine and the aftermath of the corona pandemic, economic development is particularly difficult to predict. But it is decisive for how many taxes flow to the state.
A submission from the lead Federal Ministry of Finance shows that the House of Minister Christian Lindner (FDP) is temporarily assuming higher tax revenues for the federal government than the tax assessors predicted at their most recent meeting in autumn. At that time they were still assuming a good 328 billion euros in tax revenue for 2022, but the Ministry of Finance is now proposing 345.5 billion euros as the operand. According to the template, it should be a good 366 billion next year; by 2026, revenue is expected to rise to almost 406 billion. Added to this are the revenues of the federal states and municipalities.
The other estimators – from the Ministry of Economics, the economic research institutes, the Federal Statistical Office, the Bundesbank, the Council of Economic Experts, the finance ministries of the federal states and the municipal umbrella organizations – bring their own calculations with them. The template from Lindner’s house is the basis for the discussion.
The working group sits together for three days; Lindner will announce the result on Thursday afternoon. It is clear that even rising tax revenues can only be interpreted to a limited extent as a sign of the all-clear. For one thing, a possible energy embargo against Russia has not yet been priced in. On the other hand, tax revenues are currently also increasing due to higher inflation; sooner or later, however, inflation could severely dampen consumer sentiment, which in turn would have consequences for tax revenue. In addition, Lindner has announced that it will compensate for the “cold progression” in income tax – i.e. the additional tax revenue that is based solely on the fact that citizens with a salary increase at the level of inflation will slide into a higher tax rate, even though they can no longer buy anything from their wages.