Germany sees significant increase in tax revenue after 2020 crisis

In a sign of how the German economy is recovering from the slump caused by the coronavirus crisis, tax revenues have increased considerably in 2021, even slightly exceeding the level of 2019.

German tax revenue increased by 11.5% 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% compared to 2020, when the economy was particularly affected by the coronavirus and the blockages.

According to the Federal Ministry of Finance, this is even a slight increase compared to the sum collected in the pre-crisis year of 2019 (735.9 billion euros), and a result which far exceeds the predictions of experts. In December 2021, momentum was even stronger, with revenues up 19.5% year-on-year, a sign that the recovery is set to continue into 2022.

A breakdown of the figures shows that the German federal states have benefited the most from the increase, while the federal government still bears many financial burdens related to the coronavirus. Overall, federal tax revenue fell 7.1% in 2021 – primarily due to the removal of the Solidarity Surtax for most tax residents. Revenue from petrol and diesel taxation also fell as fewer people drove and traveled in 20201.

Meanwhile, taxes going to the states have increased by 13.8%. Above all, revenue from wage and income tax and VAT has increased significantly. Sales tax revenue, which was reduced for six months in 2020, increased by 14.3% in 2021, income tax by 14.8% and corporation tax, which depends largely from corporate profits, by almost 74%. As German airports move towards resuming normal operations, revenue from the air traffic tax was nearly 94% higher than in 2020.

Unused credit authorization to invest in climate protection

New figures show that last year the German economy grew by 2.7%. While this is a sign of improvement, it has yet to offset the 4.6% drop seen in 2020. Surprisingly high tax revenues, however, have forced the government to take on less borrowing than planned last year. Around 24.8 billion euros of credit authorizations were not used.

Finance Minister Christian Lindner wants to transfer these unused credits to the climate and energy fund to help invest in climate protection and transformation in the years to come.

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