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. According to the announced results, tax revenues will recover much faster from the pandemic in the coming years than previously assumed.

Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, has commented on this matter:

“The significant upward revision in tax revenues is due to two reasons. First, the recovery of the economy after the severe downturn caused by the pandemic and the slowing effects of the supply shortages will pick up speed in the coming year. Second, as growth is currently closely interrelated with inflation, the state’s coffers are flush with extra money. The hidden tax increase via the bracket creep effect offers the new coalition leaders a welcome way out of their dilemma. On paper, the Liberals can prevent a tax increase. The Social Democrats and the Greens nevertheless achieve a de facto tax increase because the new government will not return the state’s inflation gain to the taxpayers. This development is not to be welcomed because tax increases should always be transparent.”