Tax estimate 2025: additional revenue vs. impending reduction in revenue!

Tax estimate 2025: additional revenue vs. impending reduction in revenue!

The latest tax estimate shows mixed signals for the financial situation in Germany. This year the experts expect additional income of 143 million euros. However, a decline in revenue of 131 million euros is forecast for the coming year. Finance Minister Dr. Danyal Bayaz emphasizes that no significant additional income is expected due to the current economic difficulties. Anticipatory precautions lead to a result of practically zero: there are no slumps, but there is also no additional scope for budget planning. The basis of the estimate is the federal government's spring projection, which predicts GDP growth of just 1 percent for 2025. At the end of the year, the total revenue of the federal, state and local governments is expected to rise to around 916 billion euros, which corresponds to an increase of 2.3 percent compared to the previous year.

This estimate is still influenced by the planned tax relief, which was decided at the end of 2024. These federal law changes include adjustments to income tax rates, child tax allowances and increases in child benefit. These new regulations lead to significant reductions in revenue at the federal level, with the provision for the years 2025/2026 having already been used up. Without these preventative measures, the shortfall in revenue could have been around 1.1 billion euros higher.

Focus on spending priorities

The tax estimate is of crucial importance for budget planning, especially taking the debt brake into account. By 2028, federal tax revenue is expected to increase by 30 percent relative to 2022, while state tax revenue will only increase by 21 percent. In 2025 it is forecast that total tax revenue will exceed one trillion euros for the first time. The federal government is expected to generate almost 40 percent of the revenue, while the states will receive just over 40 percent and the rest will go to municipalities and the EU.

The estimate also shows that the states are losing ground relative to federal government revenue, which is primarily due to the collapse in the real estate market. Property tax revenue is expected to be almost 30 percent lower than last year and plans a slow recovery until 2028. On the other hand, income tax is expected to increase by 34 percent and payroll tax by 44 percent, showing that some types of taxes can still show strong growth.

Anticipated challenges

Dr. Danyal Bayaz warns that the planned tax breaks for investments in 2026 will cost a three-digit million amount and will continue to increase in the following years. In addition, the new, planned changes such as the declining depreciation of 30 percent for equipment investments from 2025 are not taken into account in the current estimate. Germany's financial situation is assessed as robust, but it is essential not to implement a substantial tax increase in order to continue to meet the current challenges.

In summary, the tax estimate shows the need for prudent financial management. Careful consideration of spending priorities is considered essential to strengthening economic resilience. The upcoming tax relief and the economic conditions present those responsible with major challenges.