Germany cuts tax estimates, no additional leeway: ministry

BERLIN: Germany’s finance ministry said on Thursday it expects 148.7 billion euros ($163.69 billion) less in tax revenues for the German state in the 2023-2027 period compared with previous forecasts, leaving no extra room in budget negotiations. “We must adjust to the new budgetary realities,” Finance Minister Christian Lindner said in a statement.

For the year 2023, the federal government expects 9.8 billion euros less in revenues, while the states expect 6.6 billion less and municipalities 0.7 billion euros less, compared with the previous forecasts.

The finance ministry argues that the budget needs to be consolidated significantly following massive increases in spending during COVID-19 and due to higher energy costs as a result of the Ukraine war. Other ministries, however, are demanding more funding for their projects.

The German government has no additional leeway following the updated tax estimate, the minister said.

“We will set strict priorities when preparing the budget for the coming year,” he said, adding the gap in next year’s budget is about 20 billion euros. Lindner had said earlier on Thursday that a planned cabinet decision on the 2024 federal budget on June 21 is no longer feasible as the coalition government remains in deadlock.

“There is no new dateline,” Lindner said at a press conference in Niigata, Japan, where he is attending a meeting of the Group of Seven (G7) finance ministers.

Higher revenues had been expected in the current tax projections, spurring hopes among other ministries for more funding and some leeway in budget negotiations.

The finance minister said that instead of new spending programs, the government must return to a stability and supply-oriented fiscal policy. “New debt or tax increases are counterproductive in this respect,” Lindner added.