Despite a worsening economic climate, tax revenues are expected to remain relatively stable for the time being. According to reports cited by the newspaper Handelsblatt, various government and forecasting circles anticipate that the new tax estimate will only result in a minor revenue shortfall for federal, state, and municipal levels.
Federal Finance Minister Lars Klingbeil (SPD) is set to present the official tax estimate on Thursday. This forecast follows a series of adjustments made by the federal government regarding economic growth prospects, particularly after the outbreak of the conflict in Iran. Earlier, the government had halved its growth projection for the current year to 0.5 percent. For the coming year of 2027, the government further lowered its forecast from 1.3 to 0.9 percent.
Although this growth forecast underpins the tax estimate, government circles indicate that the state is expected to weather the situation reasonably well, and the anticipated deficit will be manageable. Previously, the internal tax estimate for the federal government had suggested a slight surplus for the period 2026 through 2028, with the 2027 figure standing at 1.3 billion euros, according to the cabinet decision on the 2027 budget. However, a recent update to this estimate showed a projected decrease of 6.3 billion euros in revenues compared to previous plans due to new tax legislation, though no substantial variance is anticipated in subsequent financial planning years.
Nevertheless, there are tangible signs that the struggling economy is starting to impact tax collection. In March alone, revenue from personal income tax had decreased by about 4 percent compared to the previous year, while corporate tax revenue fell by approximately 12 percent year-on-year. Experts now generally expect that the trade tax will remain especially sluggish, adding further strain on municipalities that are already grappling with record deficits.