The Situation Is Worse Than the Mood

The German Federal Ministry of Finance’s Working Party on Tax Revenue Estimates has published its forecasts for federal, state and municipal tax revenues in Germany. Despite the economic slowdown, the working party expects tax revenues to continue to rise significantly in the coming years, from 796.4 billion euros in 2019 to 935 billion euros in 2024. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, comments on this matter.

“The current tax forecast must not be misinterpreted. Although tax revenues will continue to rise, they will no longer be able to keep up with the huge spending pressure in the coming years. In the 2020s, the costly retirement wave of baby boomers begins. As early as next year, the federal government’s pension subsidies will exceed the 100 billion euro mark, a figure that will then grow even faster. It also looks as if, from 2021 onwards, much higher contributions to the European Union will be due than before.

New costly social reforms such as basic pensions are being prepared and there is growing pressure to boost spending on defence, investment and climate change. In the coming years, Germany will not have a revenue problem, but a massive spending problem. The times when public budgets were still running high surpluses will soon be over. At the moment, the situation is worse than the mood.”