The Ukraine war and the corona pandemic are making the economy in Germany fragile – but this is probably not reflected in the state’s tax revenue for the time being. The tax estimators are assuming that the federal, state and local governments will even take in 40.4 billion euros more this year than expected in November.

As the Ministry of Finance announced on Thursday in Berlin, the state can expect additional revenue of around 220 billion euros by 2026. Then the state could post more than one trillion euros in tax revenue for the first time in one year.

The money could make it much easier for Finance Minister Christian Lindner to comply with the debt brake again from 2023, as promised. But Lindner pointed out even before the new figures were announced that he still sees little financial leeway. “I have less income than the tax assessor could calculate,” said the FDP leader in the ARD “Morgenmagazin”.

Because the tax estimators only take into account reforms that have already passed the Bundestag and Bundesrat. Large parts of the planned relief packages because of the high energy costs are still “in delivery”, as Lindner said, so they are still in the parliamentary process.

The tax adjustment of the basic allowance, income-related expenses and long-distance commuter allowance alone will cost around 22 billion euros by 2026, which has not yet been taken into account in the estimate. How much additional money Lindner actually has to distribute is controversial. On the one hand, a significant part of the additional income is already planned.

The majority will be returned to the citizens, emphasized Lindner. On the other hand, the plus could shrink very quickly if the supply chain problems caused by the corona lockdowns in China worsen. Or if the Ukraine war leaves such a clear mark on the German economy, as some economists fear. “The current tax estimate comes in a phase of high uncertainty,” said Lindner.

The consequences of the war are still not foreseeable, and the development of interest payments is uncertain. The German economy is still growing, many companies have full order books, also because citizens are catching up on expenses that have been postponed in times of a pandemic. However, like many institutes, the federal government has recently lowered its growth expectations significantly. She only expects an increase in economic output of 2.2 percent for 2022 and 2.5 percent for 2023.

A halt to Russian gas supplies could even plunge the economy into a serious crisis. The fact that the forecast for tax revenue is not bleak is partly due to high inflation. As a rule, this also leads to higher tax revenues – unless citizens drastically limit their consumption.

This is not happening at the moment, probably also because many are catching up on expenses from the Corona period, going back to the restaurant and going on vacation. Companies are also spending more money again when their employees return to the office from their home office. Added to this is the declining number of unemployed: more people in the job means more income tax for the state, and a rise in wages as a result of inflation would add to this.

Despite the crises, Lindner can hope for record tax revenues in the coming years. For the year 2026, the estimators predict revenues of more than one trillion euros for the first time.

The tax estimate is an important basis for ongoing deliberations on the federal budget and financial planning for the following years. So far, Lindner is planning debts of 138.9 billion euros for the current year. From 2023 he wants to comply with the debt brake suspended because of the pandemic. Then only around 7.5 billion euros in loans would be allowed.


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