Germany set to reap tax windfall, easing coalition talks

Updated estimates on Thursday showed that the German government could expect billions of additional income tax revenue through to 2025.

The likely rise in income could ease negotiations between the parties negotiating to form Germany's new government.

How much more are we talking about?

Through to 2025, all levels of government — including local, state and federal — are forecast to collect an additional €179 billion ($205 billion) compared with the previous estimate in May.

The federal German government will see about €60 billion more in revenues between 2022 and 2025, as Europe's biggest economy rebounds from the pandemic shock.

The revised estimates only represent a marginal increase in the annual German government revenues of more than €1.5 trillion, however.

The Finance Ministry put the figures down to better than expected "macroeconomic figures and good tax returns in 2021."

Olaf Scholz, current finance minister and chancellor-in-waiting, said the figures were "pleasing," telling journalists the financial boost would allow more fiscal room for maneuver, not least after almost doubling German national debt in a matter of months amid the COVID pandemic.

"With successful financial management, we have created room to play with for the next government," Scholz said.

Scholz is set to succeed Angela Merkel as chancellor after his party, the Social Democrats, emerged as the largest party in September's general election. 

How might the revenue boost help talks?

The SPD is in negotiations with the Greens and the neoliberal Free Democrats (FDP) to form the next coalition government.

All three parties have voiced confidence they can build what Scholz has called a "coalition of progress." 

Scholz told reporters in Berlin that with extra financial firepower he was now more confident that the parties could bridge their remaining differences, and seal a coalition agreement before the end of November.

"One shouldn't count one's chickens before they're hatched. But it's looking good so far," Scholz said.

Extra projected revenue could prove particularly helpful when it comes to financing green investment.

The teams have been sketching out major policy priorities for the next four years. These include massive investments in climate protection, infrastructure and education. 

rc/msh (AFP, dpa, Reuters)