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Germany runs deficit despite record tax revenues in July

Germany runs deficit despite record tax revenues in July

BERLIN: Germany recorded a budget deficit in July as growing public expenditure outweighed a rise in tax revenues, an official monthly report showed Monday.

The German government posted a loss of 8.4 billion euros (9.91 billion U.S. dollars) between January and July, threatening to undermine the country’s global reputation for fiscal stability.

Monthly fluctuations make it currently impossible to foresee whether the government will still achieve its annual objective of not increasing the debt. German finance minister Wolfang Schaeuble has succeeded in running consecutive budget surpluses since 2014, a policy that is not uncontroversial amongst economists.

Nevertheless, July’s figures released on Monday are still noteworthy, as they coincided with a simultaneous boost in tax revenues. Public income from taxes shot up by 9.2 percent to 52.84 billion euros compared to the previous month.

In part, the monthly increase was due to a substantial tax rebate which the federal government was forced to offer energy producers in June. The German taxman has also benefited from the country’s lasting economic momentum, with a growth in tax revenues of 3.8 percent to 379.2 billion euros over the course of the year.

Bild newspaper reported on Monday that the inability of fiscal authorities to curb the deficit despite favorable economic developments was tied to a sharp uptick in government subsidies.

Bild cited an as-yet unpublished government paper that the volume of state subsidies had increased by five billion euros to a total of 25 billion per year. These included 5.7 billion euros in tax reductions for the heirs of companies and 3.9 billion euros for cultural activities.