Cashflow problems
May 9, 2009
The German finance ministry is expecting tax revenues to drop by 48 billion euros (64 billion US dollars) this year, according to the German daily Handelsblatt.
Official November estimates put tax revenues at 572 billion euros, but the Handelsblatt on Saturday quoted government sources as saying that only 524 billion euros are expected to reach the treasury in 2009.
The finance ministry declined to confirm the figures on Saturday, pointing to a three-day meeting in Bad Kreuznach where experts will gather on Tuesday to draw up an official tax estimate.
"Estimates are not revenues"
Although the terms billion, and even trillion, have been used rather inflationary in the wake of the global credit crunch, a potential 48-billion-euro shortfall is no trifling matter. Especially as forecasts expect the German economy to shrink by an estimated six percent this year. However, such figures still have to be taken with a pinch of salt.
Michael Jaeger, the General Secretary of the Taxpayers Association of Europe, said people should not confuse estimates with real revenues. He pointed out that tax revenues had actually increased by about 100 billion euros over the past four years.
"The state hasn't got a problem with its tax revenue. Its got a problem with expenditure," Jaeger said.
"The basic problem is that the budget is constantly blown up, while public debt increases, and in the end the taxpayer has to foot the bill."
German Finance Minister Peer Steinbrueck has warned that estimated tax revenues could drop by up to 350 billion euros over the next four years, and in view of the economic situation, he has so far refrained from promising tax cuts ahead of September's federal election.
"Something's wrong with the system"
Jaeger not only believes that lower taxes are still possible in times of economic crisis, he is also a staunch advocate of cuts to reduce the burden on the struggling taxpayer, especially since actual tax revenues for 2008 were higher than in previous years.
"It is no contradiction to save and to invest in the proper areas, and also implement tax cuts, especially for the middle class which not only creates the jobs but also bears the brunt in times of crisis," Jaeger said.
Jaeger suggested the state could cut value added tax and do away with a special tax that was introduced after German reunification to bolster the battered East, the so-called "Solidaritaetszuschlag".
"We should have decreased public debt in the days when we had a fantastic economic upturn with abundant tax revenue. If we create new net debt despite increasing tax revenues, then something's wrong with the system," he said.
According to the German Taxpayers' Federation (BdSt), public debt amounted to more than 1.5 trillion euros on Saturday evening, that's more than 19,000 euros per head -- it is important to give the date because Germany's debts are growing at an estimated 4,439 euros per second.