Germany Expects €42 Billion Less in Tax Revenue Through 2028

(Bloomberg) -- Germany’s federal government expects to collect a combined €41.6 billion ($45.2 billion) less in tax revenue through 2028 than estimated in October, potentially complicating already testy negotiations over next year’s budget.

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Finance Minister Christian Lindner said the latest tax estimates published Thursday in Berlin underscored that there is “no new financial leeway in the foreseeable future” and the ruling coalition will be forced to “say goodbye to unrealistic wishes and press ahead with consolidating the budget.”

“We can’t just pile on structural challenges with more and more debt,” he said, adding that the government should focus on reanimating Germany’s stagnant economy.

The fiscally hawkish Lindner is forcing renewed spending restraint on his cabinet colleagues after insisting on the restoration of a constitutional limit on net new borrowing — known as the debt brake — for this year’s finance plan.

The mechanism was suspended for four years through 2023 to help deal with the fallout from the Covid-19 pandemic and the energy crisis.

Read More: Germany’s Battered Coalition Heads for Next Budget Disaster

The latest revenue estimates, which are collated twice a year in May and October, showed that federal tax revenue will be €5.6 billion less than expected in 2024. Over the five—year period through 2028, revenue will be on average about €8 billion lower.

The finance ministry attributed the expected decline to a more negative assessment of the economic outlook and the impact of changes to tax regulations in the power sector.

Lindner confirmed that Chancellor Olaf Scholz’s ruling alliance of his Social Democrats, the Greens and Lindner’s Free Democrats is aiming to get next year’s budget approved in cabinet in early July before it’s sent to parliament in mid-August.

It would then be expected to win approval from lawmakers in both the lower house, or Bundestag, and the Bundesrat upper house, where the 16 regions are represented, by the end of the year.

(Updates with chart, confirmation of budget timetable)

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