Germany rakes in record tax income

December saw the biggest tax haul in German history, it was reported Friday – but the recent revenue boom is slowing down.

Germany rakes in record tax income
Photo: DPA

Germany’s long resilience to the eurozone economic crisis appears to be wearing down, even though the Finance Ministry reported a record tax income of €71 billion in December 2011 – a 4.1 percent increase on the same month the year before.

That was a significant slowdown from previous months: November saw a 7.6 percent increase and October a 8.5 percent increase.

Tax income growth slowed steadily throughout 2011, but remained healthy – increasing by 10.8 percent in the first quarter, and 6.1 percent in the fourth.

But the latest figures may hide some cause for concern, since December is traditionally the strongest tax month of the year, since it contains extra spending and income over Christmas.

Germany’s federal budget for 2011 has reflected the positive figures, with the country only taking on €17.3 billion in new debts. The federal government’s interest payments for the year totalled €32.8 billion.

The government’s prognoses for 2012 predict a slow start to the year as Germany struggles to manage the eurozone’s currency crisis, followed by a recovery in the second half of the year.

“The economy seems to be recovering and the tax income is strong,” Alfred Boss, economist at the Kiel Institute for the World Economy (IfW), told financial daily Handelsblatt. He predicts that the state could once again make ends meet with just €17 billion in new debts this year.

DPA/The Local/bk

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German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.