German Tax Forecast Points to Growing Pressure on Federal Budget Planning

Germany’s latest tax revenue forecast indicates that public finances will come under increasing pressure over the coming years, with lower-than-expected revenues likely to complicate the federal government’s fiscal planning through to 2030.

According to the updated estimates presented this week, overall tax revenues for the period between 2026 and 2030 are expected to fall significantly below the projections published last autumn. The weaker outlook reflects slower economic growth, subdued corporate profitability and lower investment activity, alongside the fiscal impact of recently introduced tax relief measures.

Commenting on the forecast, Teresa Schildmann, researcher in the Macroeconomics Department at DIW Berlin and member of Germany’s Working Group on Tax Revenue Forecasting, said the latest figures should be viewed as a warning signal for fiscal policy.

“The federal government’s financial room for manoeuvre is shrinking again,” Schildmann said, adding that weaker economic momentum and additional tax relief measures are likely to make budget preparation more difficult in the coming years.

She noted that while higher energy prices may temporarily support some revenues, particularly through value-added tax receipts, the broader economic impact remains negative. According to Schildmann, elevated uncertainty continues to weigh on consumption and investment, resulting in weaker growth and lower revenues from profit-related taxes.

The forecast also reflects the fiscal effects of several policy measures introduced in recent years, including the permanent reduction of VAT for the restaurant sector and lower electricity taxes for parts of German industry.

The updated outlook comes at a time when Germany is facing growing pressure to balance support for households and businesses with the need to stabilise public finances. Additional revenues from excise taxes are unlikely to offset the broader deterioration in fiscal conditions.

Schildmann argued that policymakers may increasingly need to focus on expenditure reforms, including a review of subsidies, improvements in administrative efficiency and longer-term adjustments to social security systems.

“The crucial factor will be to sustainably stabilise public finances without placing additional pressure on the economic recovery,” she said.

Recent estimates reported by international media indicate that expected German tax revenues for the 2026–2030 period have been revised down substantially compared with forecasts published in October, adding further pressure to the country’s medium-term budget framework.