Tax revenue fell significantly in March: recession weighs on budget negotiations

Tax revenue fell significantly in March: recession weighs on budget negotiations

Tax revenue in Germany fell significantly in March, as shown in the current monthly report from the Federal Ministry of Finance. Compared to the same month last year, they fell by 4.5 percent to 77.55 billion euros. This is the worst month of the current year so far. In the first two months of the year, however, the federal and state governments recorded noticeable increases. Overall, the increase in the first quarter was 1.6 percent to almost 203 billion euros.

Economist Jens Boysen-Hogrefe from the Kiel Institute for the World Economy commented on the development of tax revenues as a sign of recession. Given the weak economy, this could complicate the government's upcoming budget negotiations. New forecasts from the tax estimation working group, of which Boysen-Hogrefe is also a member, are expected in May. These forecasts will indicate how much the government is likely to need to cut for the 2025 budget.

In the first quarter, tax revenue recorded, among other things, declines in sales tax due to weak consumption. However, this could improve as the year progresses. March also saw declines in income and corporate taxes. Revenue from property transfer tax fell by 18 percent compared to the same month last year due to the crisis on the real estate market. However, there were at least signs of stabilization. However, there were increases in the withholding tax on interest and sales income as well as in wage tax.

The current economic data continues to present a mixed picture, as experts from the Ministry of Finance explained. Although the outlook has become more positive, for example due to increasing purchasing power and wages as well as a more stable labor market situation, the situation remains challenging.