German tax revenue projected to rise more next year amid solid growth

German tax revenue is projected to rise more than previously expected next year, buoyed by robust economic growth. 

The government's latest forecast, released on Thursday, suggests €10.9 billion ($12.2 billion) more will be raised by the German state in 2027 than predicted in May, of which €4.1 billion is for the federal government. 

Finance Minister Lars Klingbeil warned that the figures provide "no new room for manoeuvre" in the 2027 budget. 

Chancellor Friedrich Merz's recent pledge to cut electricity tax for private households and small businesses to the European minimum is estimated to cost €5.4 billion, meaning it cannot be financed entirely by the higher tax revenue, Klingbeil noted.

"Anyone who is now putting forward proposals - such as reducing the electricity tax - should also put forward proposals on how the whole thing is to be financed," said Klingbeil, who also serves as vice chancellor and co-leader of the centre-left Social Democrats (SPD).

Germany's economy has performed better than expected this year amidst the global impact from the war in Iran and high inflation, due to strong exports and heavy government expenditure in infrastructure and defence. 

The government has revised its forecast for gross domestic product (GDP) growth this year from 0.5% to 1.3%. For next year, it now expects 1.1% growth, up from 0.9%. 

The new tax forecast is an important basis for the 2027 budget, which the Bundestag is currently debating. The budget is due to be passed in parliament at the end of November, but talks are ongoing between Merz's conservatives and their coalition partners in Klingbeil's SPD. 

The working group on tax estimates includes experts from the German government, leading economic research institutes, the Federal Statistical Office, the Bundesbank, and representatives from states and municipalities.