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Germany Raises Tax Revenue Forecasts

DW staff / AFP (sp)May 11, 2006

The German government on Thursday revised upwards its forecast for tax revenues this year and in the coming years and vowed that it would be able to bring its deficit back within the EU's budget limits from 2007.

The German government can expect fuller coffers in the futureImage: Bilderbox

The federal, regional and municipal authorities were set to receive 465.5 billion euros ($593 billion) in tax revenues this year, 8.1 billion euros more than previously budgeted, the finance ministry said in a statement.

"The main reason for this is the pleasing development in profit-orientated taxes, such as income tax, corporation tax and trade tax," the ministry said.

Next year, tax revenues would amount to 494.0 billion euros, 22.3 billion euros more than previously budgeted, the ministry estimated.

Similarly, the tax revenue forecasts for 2008 and 2009 were revised upwards by 19.6 billion euros and 20.2 billion euros respectively, it continued.

Frankfurt bekommt in der Silvesternacht ein Euro-Denkmal
Germany has violated the EU's Stability and Growth Pact for a number of yearsImage: AP

"The additional revenues will help Germany meet the Maastricht criteria again from 2007," the ministry said.

Under the terms of the EU Stability and Growth Pact, eurozone members are not allowed to run up deficits in excess of 3.0 percent of gross domestic product. But Germany, the main architect of the pact, has been in breach of the 3.0-percent rule every year since 2002.

Germany's opposition has used the surprisingly positive tax revenue forecasts to call on the government to drop plans for a 3 percent increase in value-added tax starting 2007 which will take the tax rate to 19 percent.

"Taxes have to be lowered -- that's what the figures are telling us," Guido Westerwelle, head of the free-market liberal FDP party said.

Even Gregor Gysi, head of the parliamentary group of the Left Party described the value-added tax hike as "socially unfair" and said it would particularly hurt small and mid-sized companies.