This project presents a continuation of the revenue forecast of the Free State of Saxony until 2025. For sustainable regional politics, more transparency in political decision-making, and especially in the current financial and economic crisis, a continuously updated revenue forecast is of great importance. The population in the East German states is declining and consequently also the transfers from the federal fiscal equalization scheme. Moreover, the transfer payments for East Germany since the German reunification will end 2019. All of these three facts lead to decreasing state revenues. The aim of the project is thus to estimate the extent of the decline and to formulate recommendations for the fiscal policy in the Free State of Saxony This project presents a continuation of the revenue forecast of the Free State of Saxony until 2025. For sustainable regional politics, more transparency in political decision-making, and especially in the current financial and economic crisis, a continuously updated revenue forecast is of great importance. The population in the East German states is declining and consequently also the transfers from the federal fiscal equalization scheme. Moreover, the transfer payments for East Germany since the German reunification will end 2019. All of these three facts lead to decreasing state revenues. The aim of the project is thus to estimate the extent of the decline and to formulate recommendations for the fiscal policy in the Free State of Saxony.
To forecast the revenues until 2025, it is first necessary to consider the various components of revenues separately. Under plausible assumptions and consideration of relevant legal regulations, the developments of individual revenue components are projected into the future. Over the projected time of 16 years significant unexpected events can have a large impact on the revenue development. In order to quantify the influence of the assumptions a sensitivity analysis of the computed revenues is conducted.
Communal Statistical Office of the Free State of Saxony Federal state office
We find that the income of the Free State of Saxony will decrease by approximately about one quarter. The reduction is attributed to a decline in tax revenues due to the economic crisis and the diminishing transfer payments to the East German States. Whereas the decline in transfers follows a set plan, the development of the tax revenues that are dependent on economic performance is uncertain. Therefore it is necessary to keep updating the current long term revenue forecast periodically when new data becomes available.
Thum, Marcel, Johannes Steinbrecher and Christian Thater: Wirtschaftliche Entwicklung Sachsens im Ländervergleich: Bestandaufnahme und Perspektiven, ifo Dresden Studie 57, München/Dresden 2010.
Ragnitz, Joachim, „Berücksichtigung qualitativer Aspekte bei der Konsolidierung der öffentlichen Haushalte in Sachsen“, in: ifo Dresden berichtet 04/2010, p. 23-30. (Download, PDF, 121 KB).
Steinbrecher, Johannes and Christian Thater, „Langfristige Projektion der Einnahmeentwicklung für den Landeshaushalt des Freistaates Sachsen“, in: ifo Dresden berichtet 01/2010, p. 33-39. (Download, PDF, 166 KB).
Sächsisches Staatsministerium der Finanzen (Ed.): Mittelfristige Finanzplanung des Freistaates Sachsen 2009 – 2013. Dresden, 2009.
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