It’s one of those things with tax estimates: sometimes they last longer, sometimes they have a quick expiry date. Ultimately, they are “snapshots” – the term was used by Federal Minister of Finance Christian Lindner (FDP) on Thursday when he presented the latest figures. This is particularly true for this tax estimate.
Due to the Ukraine war, the inflationary tendencies, the unclear further development of the corona pandemic, the global supply chain and production problems, several imponderables are accumulating. And nobody knows exactly how these will affect the next few months or even years. Lindner’s entry formula at his press conference was: “There is no reason for jubilation.”
The art was to estimate the respective positive and negative consequences for tax revenue. For example, the impact of high energy prices had to be weighed up. Basically, inflation drives up revenue, for example through sales tax. But it can also lead to reluctance to buy, to saving, which reduces income again.
Another example: Does inflation lead to higher salaries in the medium term because workers are pushing for compensation? Or does a worsening economic environment make unions more likely to exercise wage moderation? One drives taxes up, the other dampens them. In addition, higher prices not only mean potentially higher revenues, but also higher government spending.
And there is another special feature of the tax estimate. The group of around 30 tax officials and economists, which meets twice a year to estimate (in May and November) under the direction of the Federal Ministry of Finance, is not allowed to include government projects that have not yet been approved in parliament in their data. This is currently affecting the second relief package from the traffic light coalition.
In short: The additional revenue for the federal, state and local governments of 220 billion euros that Lindner named for the period up to 2026 is actually as of May 12th – and little more. In just a few weeks, the estimators might come up with a different number. And things can look different again in November, especially if the currently relatively stable economic situation deteriorates more severely.
For the current year, Lindner named a tax plus of 17 billion euros for the federal government – but that is the sum that the minister also mentioned when it came to the reduced income from the relief package. So a zero-sum game.
In view of the expectations aroused in advance because of allegedly surprisingly positive figures or “gigantic additional income” (so one headline said), Lindner felt compelled to give the warning Minister of Finance. The scope for 2022 is not great, he said on Thursday. Three days before the state elections in North Rhine-Westphalia, he wanted to send the signal again that the federal coalition wanted to further relieve the burden on citizens – which would further reduce state revenues. After all, the FDP boss does not want to appear as the treasurer of the receiving state. Or as a debt Lindner, as the Union likes to call him at the moment. He wants to be seen as a solid householder who gives something to the citizens.
Lindner therefore pointed out that after the abolition of the EEG levy from 2023, the standard rate of basic security and the tax exemption should be increased for everyone. In addition, the income tax rate must be adjusted to inflation.
Lindner also referred to a growing risk of government spending – rising interest rates. If old bonds are rescheduled in the coming years, the state will not get away with it as cheaply as it did during the zero-interest phase. A part of the now estimated additional income for the coming years would also have already been planned.