Germany's higher tax revenue estimates will not offer more fiscal leeway, minister says

New German tax estimates presented on Thursday ‌will not offer additional fiscal leeway, even though the government can expect slightly higher tax revenue in the coming years than previously anticipated, the finance minister said. "We will need to continue consolidating the federal budget in order to create room for action in the future," Finance Minister Lars Klingbeil ‌said while presenting the forecasts.

Germany's council of tax experts expects €43.4 billion ($48.6 billion) more in tax revenue from 2026 to ‌2030 than forecast in May, the updated projections showed. Only €3.3 billion of that total will go to the federal government over the five-year period, the ministry said. States and municipalities, in particular, will receive more money.

The higher-than-expected tax revenue was due to a nascent economic recovery in Europe's biggest economy following years of stagnation, according to the ⁠ministry. "We see ​growth returning, and we see that ⁠Germany is becoming an attractive place for investment," Klingbeil said.

The government has raised the forecast for economic growth to 1.3% in 2026 and 1.1% in 2027, as ⁠the Iran war is not hurting the economy as much as feared. It had expected 0.5% growth for 2026 and 0.9% for 2027 in its ​April forecasts. "We can expect tax revenue to develop steadily in 2026 despite international crises and uncertainties," Klingbeil said. "We have responded ⁠to these crises, and we are in a robust position."

For 2026, the tax panel expects total government revenue of €997.9 billion. NO ADDITIONAL ROOM IN 2027 BUDGET

The council also expects ⁠2027 ​federal government tax revenue to be €4.1 billion higher than forecast in May. However, the estimate does not include planned tax relief measures because parliament has not yet approved them. “The good news: There are no new shortfalls,” Klingbeil said, referring to the draft budget being ⁠debated in parliament. “The bad news: There won’t be any new financial leeway either.”

For 2027, planned tax relief will absorb €1.7 billion of the additional €4.1 billion ⁠available, State Secretary Steffen Meyer said. A ⁠further €2.5 billion will be absorbed by the debt brake's cyclical component, as the government now expects stronger growth in 2027 than in its previous forecasts and therefore less borrowing is permitted.

For 2028, a shortfall of €22 ‌billion for the ‌budget remains, Klingbeil said. ($1 = 0.8931 euros)