The federal, state and local governments will have to make do with 21.9 billion euros less tax revenue next year than was assumed in the fall. The tax estimators assume that the state will receive a total of 995.2 billion euros in 2025, as the Ministry of Finance announced on Thursday in Berlin.
Finance Minister Christian Lindner (FDP) said: “What I repeat almost like a mantra in view of the exorbitant political wishes is now in black and white: There is no new financial scope for the foreseeable future.”
In the remaining years of the estimation period up to 2028, there will also be significant reductions in revenue compared to the last estimate – a total of 80.7 billion euros. According to the Ministry of Finance, tax revenue is on average around 16 billion euros lower annually compared to the expectation from October 2023.
Lindner called the current tax estimate a “reality check” for the 2025 federal budget. “We have to say goodbye to unrealistic wishes and push forward with budget consolidation. This requires discipline and willpower.” The estimation result also shows that the financial challenges will become greater in the coming years. “If we don’t take countermeasures now, the development will get worse, especially for the federal government. We cannot cover up the structural challenges with more and more debt. What we need is obvious: more growth, we need the economic turnaround,” said Lindner. “We can only create prosperity and stable government finances with strong economic development.”
For the federal government alone, tax revenue for 2025 will be around 11 billion euros lower. The results are likely to bring even more pressure to the already difficult negotiations on the 2025 federal budget. Billions of holes need to be plugged.
Several federal ministries do not want to adhere to Lindner’s austerity guidelines – which Lindner in turn sharply criticizes. The aim is to reach an agreement in the cabinet on the 2025 budget by the beginning of July, then discussions in the Bundestag will follow.
The tax estimate’s forecast is an important basis for discussions on the 2025 federal budget. Whether savings need to be made or whether there is room for additional spending depends, among other things, on the tax estimate.
The Ministry of Finance justified the difference to the result of the October tax estimate primarily with a worsening assessment of the economy. The economic recovery was delayed compared to expectations at the time.
Germany is experiencing weak growth. This year, the federal government is expecting mini-growth of 0.3 percent. It expects growth of 1.0 percent for 2025.
The tax estimation working group meets twice a year, in spring and autumn. The committee includes experts from the federal government, the leading economic research institutes, the Federal Statistical Office, the Bundesbank, the Advisory Council for the Assessment of Overall Economic Development in Germany, as well as representatives of the state finance ministries and municipalities.