Tax revenues fill German state coffers | News | DW | 21.07.2012
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Tax revenues fill German state coffers

A buoyant labor market and an accompanying increase in tax revenues mean that Germany will likely be able to borrow less money than expected this year. This positive trend is expected to continue.

Tax revenue in Germany at a federal and state level reached 268.2 billion euros ($326 billion) in the first half of this year, according to statistics released by the German finance ministry on Friday. That represents a rise of 4.4 percent compared with the same period last year.

In June alone, tax revenue increased by 7.5 percent in comparison with the same month last year.

Experts attribute the increase to the positive situation on the labor market. The overall cost to the government in this sector sank by some 2.4 billion euros ($2.92 billion). The extremely low interest rate also reduced the burden on the German budget by around 1 billion euros ($1.22 billion).

Germany is also benefiting from investment jitters amid Europe's debt woes, with investors even accepting negative interest rates to buy German short-term state bonds, seen as a relatively secure option.

Less debt likely

All these factors mean that Germany will probably have to take up less debt than planned.

"Instead of the planned 32 billion euros ($39 billion), the German government will manage with around 25 billion euros ($30.4 billion) in net borrowing this year," Alfred Boss from the Kiel Institute for the World Economy told the German daily Handelsblatt.

The trend seems likely to continue, according to experts.

"The extremely low rate of interest will take pressure off the budget in the coming months as well," Heinz Gebhardt, the financial expert from the economic research institute RWI, told Reuters news agency.

Gebhardt also reckons with even more tax revenue in 2012 than the 595.5 billion euros ($724 billion) estimated by the state.

"Things are going better than expected in the most recent prognosis; we'll go above that," Gebhardt said.

He said one reason for this was that the economy could grow more than the 0.7 percent forecast by the German government.

Many economists expect growth of 1 percent or more.

tj/pfd (Reuters, dapd)