Due to Corona: reduced tax revenue and a supplementary budget

by Thorsten Koch

The Federal Republic of Germany will receive around 100 billion Euros less taxes in 2020 than was forecast the previous year. Such are the results of the Tax Estimates Working Group. The situation is due to the Corona crisis. Several media had previously reported a loss of 119 billion Euros. For 2021, state revenue shortfalls of 40 to 50 billion euros are to be expected.

Federal Minister of Finance Olaf Scholz (SPD) said that at the federal level, there was a decline of 44 billion euros. Updated figures are to be communicated in late summer in the interests of ensuring sufficient planning security. Scholz offered the municipalities a debt relief program. Cities and municipalities are in a tense situation, he said. According to the German Association of Cities, the reduced tax revenue of cities and municipalities is situated at 20 billion euros. According to the Association of Cities and Municipalities, this figure is up to 30 billion Euros. A “dramatic minus” of up to 25 billion euros is expected for trade tax along. Tax losses have to be compensated for. The taxpayers’ union demanded a rigorous review of government spending and questioned plans for the introduction of a basic pension.

German economic output declined noticeably in the first quarter of 2020. From January to March, gross domestic product decreased by 2.2 percent, compared to the same period in the previous year, the Federal Statistical Office said, one of the largest declines after the Euro financial crisis and the German unification. Exports, consumer spending and investments have dropped significantly due to necessary corona measures.

Federal Finance Minister Olaf Scholz (SPD) would like to have a supplementary budget approved in late summer, to amount to 100 billion Euros, some of which will be used specifically to cope with the consequences of the Conona crisis. Scholz will require 50 billion Euros for a planned stimulus package. Subsidies to the social security systems will also be necessary.

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