Tax revenues growing

At the close of a three-day workshop in Nuremberg, tax experts from Germany's local, state and federal finance ministries released a prognosis that tax revenues would continue to grow in line with the German economy. The experts estimated that 2015 total tax revenues for all levels of government would amount to 671.7 billion euros ($731 billion), and by 2020 would rise to 795.6 billion euros.

"The German state's solid finances make it capable of taking action," said German Finance Minister Wolfgang Schäuble. "In view of the challenges we face, that's of decisive importance. With the help of this year's surplus, current indications are that we'll be able to get through 2016 as well without adding to cumulative debt."

A twice-a-year geek party for German tax experts

The meetings of the "Tax Estimates Workgroup" comprises experts from federal and state finance ministries, the German Bundesbank (central bank), the Federal Statistics Office and a number of research agencies. The Nuremberg meeting was the 147th session of the group, which meets twice a year, in May and November.

The last session, in May 2015, had projected total tax revenues for 2015 at 5.2 billion euros less than the current (November) session's estimate - the government's kitty for this year will be slightly fatter than had been expected six months ago.

On the other hand, slightly higher total tax revenues for 2016 had been predicted in May's session than were projected in the current session - not because of any slowdown in the economy, but rather because of adjustments in the tax code that will provide some relief to taxpayers. The federal government is expected to take in 4.9 billion euros less in tax revenues in 2016 than had been projected in May, and municipalities 1.9 billion less. On the other hand, Germany's states are now projected to take in 3.4 billion more in 2016 than had been projected in May.

But continued economic growth in 2017 and beyond is expected to overwhelm any blip in tax revenues resulting from those tax-code changes, and revenues will continue to rise at a healthy clip.

General upward trend

Gross (pre-tax) wages and salaries are the most important factor for calculating estimates of tax revenues, and the experts estimated that total wages and salaries earned by Germans in 2015 would end up 4.0 percent higher than they had been for 2014. These numbers are for the nation's total wage packet - they are not per-capita figures.

.Growth in the nation's aggregate wage packet is projected to be 3.5 percent in 2016 and 2017. The 2016 figure is 0.6 percent more than had been projected in the May session of the Tax Estimates Workgroup. For 2018 through 2020, the finance ministries project an annual wage packet growth of 3.0 percent.

Incomes and earnings of German businesses and corporations are also expected to grow in coming years. The estimate for 2015 is that total earnings will grow by 5.3 percent year-on-year compared to 2014; for 2016, the projection is 4.5 percent.

As laws change, so do tax revenues

The estimates made by the Tax Estimates Workgroup are always made on the basis of currently valid tax laws and regulations. If and when the regulations change, so do the revenue projections. Compared to the Workgroup's May 2015 session, the tax experts had to estimate the impact of nine distinct regulatory changes in Germany's complex tax laws in preparation for the November session.

Much bigger changes to tax revenues could result if countries would work together to successfully crack down on tax havens and dubious accounting practices that allow corporations and wealthy individuals to dodge taxes, but recent attempts to make progress in that direction have remained largely unsuccessful.

nz/hg (Reuters, German Ministry of Finance website)