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Germany sees significant increase in tax revenue after 2020 slump

Germany sees significant increase in tax revenue after 2020 slump

In a sign of how the German economy is recovering from the slump driven by the coronavirus crisis, tax revenues rose significantly in 2021, even slightly exceeding the 2019 level. 

German tax revenue rose 11,5 percent in 2021

Federal and state tax revenues increased significantly in 2021, with tax offices across Germany collecting a total of almost 761 billion euros - an increase of 11,5 percent on 2020, when the economy was particularly badly affected by coronavirus and lockdowns. 

According to the Federal Ministry of Finance, this is even a slight increase on the sum collected in the pre-crisis year of 2019 (735,9 billion euros), and a result that far exceeds the forecasts of experts. In December 2021, the momentum was even stronger, with revenues increasing by 19,5 percent compared to the previous year - a sign that the recovery should continue into 2022. 

A breakdown of the figures show that it was Germany’s federal states who benefited most from the increase, while the federal government is still shouldering many coronavirus-related financial burdens. Overall, federal tax income fell by 7,1 percent in 2021 - mainly as a result of the abolition of the solidarity surcharge for most tax residents. Revenue from the taxation of petrol and diesel also fell as fewer people were driving and travelling in 20201. 

Meanwhile, taxes going to the states rose by 13,8 percent. Above all, revenue from wage and income taxes and VAT rose significantly. Revenue from the sales tax, which was reduced for six months in 2020, rose by 14,3 percent in 2021, income tax by 14,8 percent and corporate income tax, which is largely dependent on company profits, by almost 74 percent. With airports in Germany moving towards recovering normal operations, income from air traffic tax was nearly 94 percent above the 2020 level. 

Unused credit authorisation to be invested in climate protection

New figures show that last year, the German economy grew by 2,7 percent. While a sign of improvement, this has not yet made up for the 4,6-percent slump seen in 2020. The unexpectedly high tax revenue, however, meant that the government had to take out fewer loans last year than expected. Around 24,8 billion euros in credit authorisations were not used. 

The Finance Minister, Christian Lindner, wants to shift these unused credits into the climate and energy fund to help invest in climate protection and transformation in the coming years. 

Abi

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Abi Carter

Abi studied History & German at the University of Manchester. She has since worked as a writer, editor and content marketeer, but still has a soft spot for museums, castles...

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