ZEW Economist Friedrich Heinemann on Tax Revenue Estimates

The German Federal Ministry of Finance’s Working Party on Tax Revenue Estimates presented the results of its new analysis today. It is becoming apparent that the current tax revenues, although strongly affected by the pandemic, will recover more significantly in the next few years than previously expected. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, explains:

“With the end of the pandemic in sight, Germany is on the verge of a stunning economic upswing. This recovery will, with some delay, also lift tax revenues back to pre-crisis levels and above. Many current election campaign plans nevertheless focus on tax increases. In contrast, the current tax estimate, with its further improved outlook in the medium term, confirms that public budgets in Germany have no revenue shortfall. Against this background, the debate on tax increases is premature and risky. Many of the currently planned tax increases, from the introduction of a wealth tax to raising the top tax rate, could also adversely affect small and medium-sized enterprises in particular and their ability to invest. The latest tax estimate confirms that there is no fiscal need to take these risks if policymakers are more disciplined about their spending again after the pandemic.”