Der Koalitionsvertrag aus finanzpolitischer Sicht

After weeks of negotiations the coalition finally agreed on the conditions for their political work. Not surprisingly, the coalition agreement is complex and intransparent – with a multitude of single measures far away from a precise definition. Quantifying the programme and estimating resulting cash flows is currently difficult; official calculations are – if at all – only partly available. Anyhow, the contract will form the basis for economic policy during the next four years; therefore its evaluation by now is indispensable. The thin red line of the agreement – not astonishingly when considering the precarious financial situation of the public sector – is consolidation. However, more than 80% of the consolidation volume results from the revenue side. Though one third of this is due to the cutback of tax exemptions, the lion’s share comes from raising tax rates, mainly the VAT standard rate. In contrast, cutting back public expenditure is minor and the agreement clearly comes short of the Koch/Steinbrück proposal; even new tax reliefs are created. The consolidation is almost completely borne by private households. Enterprises as a whole are barely hit. However, they have to wait until 2008 for a reform of company taxation – one of the most pressing problems in this legislative period. To reduce the companies tax burden until the reform starts the conditions for tax depreciation are temporarily relaxed. Anyway, from an international point of view the statutory tax rate is an important signal to enterprises deciding where to invest. Lowering effective tax rates by changing depreciation conditions is intransparent and, thus, will be less effective. Furthermore savings within the public sector are planned to accomplish consolidation; 10 billion Euro should result from efficiency gains and reduced expenditure. Consolidation measures mainly focus on the budget of the federal government. However, Länder and communities will participate in the additional tax revenues. In contrast, social securities will loose – and therefore also the share of employment that is subject to social insurance contribution. Particularly the unemployment insurance will be burdened by the decrease of its premium rate. Besides, the federal government will reduce its grants to the pension funds and most notably the health system. The contract is dominated by fiscal constraints. Cyclical requirements are considered only cursory and pressing structural reforms are put off. The reforms of company’s taxation, of fiscal federalism, of the health system as well as a proceeding reform of the labour market are only proposed. How and when measures in these fields are realised will determine whether fiscal policy can set a new course.

Unternehmenssteuerreform: eine Veranlagungssimulation für ostdeutsche Industrieunternehmen

Die sich Ende des Jahres 1999 zunehmend konkretisierenden Regierungspläne zur Reform der Unternehmensbesteuerung werden mit Hilfe einer mikroökonomischen Veranlagungssimulation anhand ostdeutscher Industrieunternehmen untersucht. Die Analyse bezieht sowohl die Unternehmens- als auch die Unternehmerebene, sowohl Kapital- als auch Personengesellschaften ein. Die beabsichtigte Verbreiterung der Bemessungsgrundlage wird berücksichtigt.

Konsolidierung dominiert Finanzpolitik

Submitting the Stability and Growth Pact European member states committed themselves to reduce their budget deficits. In spring this year the German fiscal position worsened more and more and it became obvious that the deficit target would – again – be missed. Despite the worsened starting point Germany affirmed to follow its original stability programme and to attain a budget “close to balance” by the year 2004. Thus, consolidation will have to be strengthened and the scope for fiscal policy narrows down. If current fiscal policy is not sustainable, the necessity of consolidation is obvious. However, the mode of consolidation is controversial. The Stability and Growth Pact focuses on converging budget deficits close to balance. For this, short-term oriented consolidation dominates the more medium and long-term oriented aspects of fiscal policy. Generating economic conditions by fiscal policy is at least restricted, maybe temporarily impossible – and shortening the consolidation period increases its costs. A forecast of the government’s financial development in the years 2002 to 2006 shows clearly that the restructuring of revenues and expenditure will show no progress. In particular, the lack of structural reforms will burden Germany’s fiscal situation in the medium-term oriented consolidation period. However: the political self-commitment this spring leaves no scope for alternatives, but to enforce the consolidation. Despite some efforts, the projection concludes that by the year 2004 the budget will show a deficit.

Auch nach 20 Jahren: Steuereinnahmen in den Neuen Ländern schwach

20 years after unification in the eastern part of Germany tax revenue is still lagging behind economic convergence. Why are tax receipts still low? Which factors determine tax revenue? Is it the economic potential that determines the level of tax receipts? In which way does tax expenditure affect receipts? By a detailed analysis of single taxes these questions are answered.

Zu den Anreizwirkungen der Unternehmenssteuerreform

Der Gesetzentwurf zur Reform der Unternehmensbesteuerung vom Februar des Jahres wird anhand einer mikroökonomischen Veranlagungssimulation für (westdeutsche) Personengesellschaften unterschiedlicher Größe analysiert. Der mikroökonomischen Untersuchung werden die erwarteten makroökonomischen Auswirkungen der Reform - ihre allokativen und distributiven Folgewirkungen - gegenübergestellt.

Konsolidierung dominiert Finanzpolitik

Submitting the Stability and Growth Pact European member states committed themselves to reduce their budget deficits. In spring this year the German fiscal position worsened more and more and it became obvious that the deficit target would – again – be missed. Despite the worsened starting point Germany affirmed to follow its original stability programme and to attain a budget “close to balance” by the year 2004. Thus, consolidation will have to be strengthened and the scope for fiscal policy narrows down. If current fiscal policy is not sustainable, the necessity of consolidation is obvious. However, the mode of consolidation is controversial. The Stability and Growth Pact focuses on converging budget deficits close to balance. For this, short-term oriented consolidation dominates the more medium and long-term oriented aspects of fiscal policy. Generating economic conditions by fiscal policy is at least restricted, maybe temporarily impossible – and shortening the consolidation period increases its costs. A forecast of the government’s financial development in the years 2002 to 2006 shows clearly that the restructuring of revenues and expenditure will show no progress. In particular, the lack of structural reforms will burden Germany’s fiscal situation in the medium-term oriented consolidation period. However: the political self-commitment this spring leaves no scope for alternatives, but to enforce the consolidation. Despite some efforts, the projection concludes that by the year 2004 the budget will show a deficit.

Mittelfristprojektion des IWH: Wirtschaftsentwicklung und Staatsfinanzen – Eine Vorausschau der Jahre 2011 bis 2015

In 2010 economic activity in Germany improved steadily. While global trade increased in the first half of the year – and, thus, German exports – domestic demand became increasingly important. Private Investment recovered and – even more important – consumption contributed to economic growth. Moreover, employment reached an all-time high and unemployment decreased further during the year. Until 2015 economic growth will keep to be relatively high. German external trade will still gain momentum by the development of global trade. However, economic development will be driven more and more by domestic demand. Interest rates will remain relatively low and stimulate investment activity. Moreover, unemployment will continually shrink, partly reflecting demographic developments, but partly mirrored in increasing employment. Due to a higher degree of employment security and rising wages consumption will gain momentum. Real GDP will increase by 2.3% in 2011 and by 1.7% in 2012. From 2013 – 2015 it will rise by 1½% on average. While the German economy will gain strength, public budgets will clearly improve. In 2010 the deficit ratio exceeds the Maastricht threshold only slightly; in relation to nominal GDP the German budget deficit was about 3.2%. Concerning the high fiscal stimulus, mainly given in the years 2009 and 2010, the deficit ratio is surprisingly low. While income and wage taxes as well as the receipts from social security contributions already increased, unemployment benefits already declined substantially. The midterm projection shows a favorable development of public budgets. While employment remains high and unemployment continually decreases, the wage tax and the social security contributions will boost revenue. On contrast the same development will lessen public expenditure, especially transfers. This projection relies heavily on the assumption that fiscal policy will trace its consolidation plans. For instance, it is assumed that the federal level will implement their plans from summer/autumn 2010 and that there will be no additional measures. In this case, in 2015 the German public budget will show a surplus of ¼% in relation to GDP.

Schuldenbremse: Bisherige Beschlüsse stellen Gelingen auf Länderebene infrage

Starting in 2011, Germany will have a new fiscal rule to limit indebtedness - the debt brake. To encourage the functioning of this regulation on federal and Länder level, an advice board (Stabilitätsrat) was founded in April 2010. In a first step he selected four key numbers and defined thresholds. This article focuses on the chosen indicators and thresholds on Länder level by evaluating the effectiveness of both, the key figures themselves and their thresholds. We are analyzing time series from 1995 to 2009. The findings show that in general, the chosen figures are able to indicate a possible debt risk. However, the threshold values of the advice board endanger the effectiveness of the debt brake. This danger is especially caused by the mode of calculation: The thresholds are based on an average of German Länder. For this reason, only extremely negative household developments are pointed out. Furthermore, the new German debt brake is fundamentally based on the structural budget balance. Nevertheless, this key figure has not directly been chosen by the board. The approach of the board can be explained by the fact that there is - so far - no agreement between the federal level and the Länder how to calculate the structural balance on the Länder level. This circumstance is precarious, because the debt brake cannot step really into force without the calculation of the structural budget balance for the Länder. For this reason, we try to close this vacancy by proposing a possible calculating mode for the structural part of the budget. The results of this calculation are indicating that on average the fiscal policy of the Länder was not sustainable. Key numbers as defined by the board indicated this only for a few of the Länder. From our point of view policy urgently has to act – otherwise the debt brake might not be successful.