Bracing for Lower Tax Revenues: Germany Shortchanges by 33 Billion Euros by 2029
Red-black entities need to reduce expenditure by 33 billion by 2029.
Swimming against the current, the German government must face a substantial decline in tax revenues over the next few years as per the newly unveiled estimate. This reduction affects not only the federal government but also state and local authorities. The new tax projection sets the figure in the tens of billions of euros.
The Working Group on Tax Projections has disclosed its forecast for the years 2025 to 2029. By following this projection, the total revenue for the next five years may fall short by approximately 81.2 billion euros. The federal government, alone, will encounter losses of 33.3 billion euros.
This unfavorable forecast leaves no room for comfort when drafting budgets for 2025 and 2026. In contrast with the previous estimate, the federal government faces shortfalls of 600 million euros for 2025 and 10.2 billion euros for 2026.
Klingbeil will present his proposal for the federal budget 2025 to the cabinet on June 25. Before the summer break, the government will also make decisions concerning the key figures for the budget 2026. The budget plan for the following year and the financial plan up to 2029 will be presented to initiate immediate discussions in parliament following the summer break.
Implementing Investment Boosters
Klingbeil has announced plans to speed up the introduction of investment incentives. Strengthening revenues through increased economic growth and generating new financial leeway is of utmost importance, says Klingbeil. To reach this goal, targeted investments from the special fund for infrastructure will be deployed swiftly. Critical structural reforms will also be undertaken to stimulate the economy and secure jobs.
Klingbeil emphasizes the immediate implementation of higher depreciation on the tax on investments. Plans are underway to decide on this investment booster before the summer break. A 30% degressive depreciation on investment equipment is proposed for the years 2025 to 2027. In addition, the agreed upon corporate tax reduction by the Union and SPD will take effect from 2028.
Economic difficulties persist, explains Finance Minister Lars Klingbeil. Though tax revenues are largely as anticipated in the coalition negotiations, there is a slight burden in 2025 and 2026, with relief expected starting in 2027. The revised forecast underscores the need to strengthen revenues via increased economic growth to secure financial leeway.
[1] rog/rts[2] ntv.de[3] economy[4] reasons for investment drought Study paints bleak picture of Germany
- To address the anticipated deficit in tax revenue due to lower tax collections and stimulate business growth, the federal government is planning to implement investment boosters, such as higher depreciation on investment taxes and targeted infrastructure investments.
- In light of the projected shortage in tax revenue for the years 2025 to 2029, it is crucial for the community to implement these policies to optimize finance management, ensure business continuity, and secure the necessary tax revenue.
