Tax revenue: the real estate crisis tears a billion-dollar hole in the national budget


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Sudden billion hole – real estate crisis reaches the national budget

In March, just 24,500 new apartments were approved - 29.6 percent fewer than a year ago In March, just 24,500 new apartments were approved - 29.6 percent fewer than a year ago

In March, just 24,500 new apartments were approved – 29.6 percent fewer than a year ago

Quelle: Getty Images/Busà Photography

The slump in construction activity in the country is also reflected in the national budget. Revenue from a tax that is important to the countries has fallen by a third, new figures show. There are also significant shifts in other taxes. In one case, the federal government benefits.

Ea spokeswoman for Federal Building Minister Klara Geywitz (SPD) recently spoke of “actually bad” numbers. She referred to current figures from the Federal Statistical Office, according to which just 24,500 new apartments were approved in March – 29.6 percent less than a year ago.

The finance ministers of the federal states can also speak of bad numbers. The income from property transfer tax fell by a third in the first four months of the year. This emerges from the current monthly report of the Federal Ministry of Finance.

According to this, from the beginning of January to the end of April, just 4.3 billion euros flowed into the coffers of the federal states. That is 2.1 billion euros less than in the same period last year, when this tax brought 6.4 billion euros into the coffers. As with the building permits, the consequences of the high construction costs and increased mortgage interest rates are becoming increasingly evident.

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Six months ago, hardly any tax experts had expected the real estate crisis to have such drastic consequences for the national budget. In autumn, the official estimators assumed income from the real estate transfer tax for the full year 2023 of 16.9 billion euros. At the most recent meeting of the working group on tax estimates in mid-May, they lowered this target to 13 billion euros.

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This forecast gap could widen further over the course of the year if the situation in construction does not improve soon – with corresponding consequences for the state budgets. The real estate transfer tax is the most important of those taxes that benefit 100 percent of the countries.

In addition, the income from the inheritance tax, the second major state tax, are below the previous year’s figure after four months of the year. Instead of 3.6 billion euros as in the previous year, only 3.2 billion euros have come in – a drop of eleven percent.

Confederation benefits from insurance tax

Overall, the fall in state revenue – including revenue from community taxes such as income tax and sales tax – was 4.2 percent by the end of April. The federal government, on the other hand, is at a slight plus of 0.6 percent after a third of the year. In the previous year, it was assumed that there would be a much stronger increase in tax revenue.

In addition, the opposite trend in revenue at the two levels of government does not change the fact that the federal states have collected significantly more taxes than the federal government so far this year. The interim figure: 116 billion euros for the federal states compared to 108 billion euros for the federal government.

Unlike the federal states, the federal government even benefits from the price development in construction in one area, namely in insurance tax. This pure federal tax has developed extremely positively so far this year. At EUR 8.7 billion, revenue is a good seven percent higher than in the previous year, when the federal government received EUR 8.1 billion by the end of April.

The higher insurance tax revenue is primarily due to higher contributions to property and casualty insurance, which means that tax payments to the state are also increasing. Particularly strong premium increases are expected for residential buildings insurance.

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40 percent of GDP from taxes

“We are assuming that the total premiums in residential building insurance will increase by 16 percent this year,” said GDV General Manager Jörg Asmussen at the end of April. He attributed this to further rising construction prices.

A national analysis makes it clear that the decline in real estate transfer tax receipts is only offset to a small extent by higher tax receipts elsewhere. Especially since the minus in other types of taxes due to the weakening construction industry, such as income and corporation tax, is not even taken into account.

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