Germany cuts tax evaluations by more than EUR33 billion

(MENAFN) Germany is facing a significant drop in tax revenue over the next several years due to continued economic weakness and planned tax relief measures, according to new figures from the country’s Council of Economic Experts.

The federal government is expected to collect €33.3 billion ($37.3 billion) less in taxes through 2029 than previously forecast, with this year’s intake falling €600 million below earlier projections. The shortfall is expected to peak in 2026, with a €10.2 billion gap. A modest recovery in tax revenue is predicted starting in 2027.

On average, tax income will be about €16 billion lower per year than estimates made in October 2024, the Finance Ministry stated. The federal government alone is facing an annual average revenue gap of around €7 billion.

Finance Minister and Vice Chancellor Lars Klingbeil said the economy is still “in turbulent waters,” and emphasized that increasing growth is the only viable path to financial stability. He acknowledged that the updated revenue outlook will make it more difficult to finalize the government’s budgets for this year and next.

The country has been operating under a provisional budget in 2025 after the collapse of Chancellor Olaf Scholz’s coalition in November 2024 prevented the passage of a new financial plan.

Klingbeil announced this week that a revised 2025 draft budget will be submitted for cabinet approval by the end of June. It will include business tax breaks to encourage economic expansion, along with legislation to create a €500 billion infrastructure fund. A draft budget for 2026 will follow shortly afterward.

Germany remains the only G7 country to post no economic growth over the past two years. The International Monetary Fund predicts it will again trail the group in 2025, with expected GDP growth of just 0.1%.

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