Tax revenue forecasts are an essential factor in planning the government budget. The Working Group on Tax Revenue Forecasting (AKS), an advisory board of the Federal Ministry of Finance (BMF), makes its forecast calculation in May and in November. The May forecast includes a medium-term estimate for the coming three years.
In addition to representatives of the federal and state governments, the Working Group includes the following:
For estimating tax revenues in Germany, the Working Group examines all types of taxes individually. This disaggregated procedure makes it possible to allocate trends in the individual taxation categories to the individual regional authorities directly (federal taxes, state taxes, municipal taxes and community taxes).
The estimates are based on the macroeconomic assumptions of the Federal Ministry for Economics and Technology. In addition, the effects of tax reforms estimated by the Federal Ministry of Finance and important decisions of the fiscal courts are taken into consideration.
The Working Group does not have a homogeneous forecasting instrument. The various estimation proposals are based on very different models. This heterogeneity leads to a productive competition among forecasting models. Successful approaches win out and the models are further developed in the ongoing discussion process.
The independence of the Working Group is of particular importance for the quality of the forecast. Recent studies of the Ifo Institute conclude that in an international comparison, tax estimates are especially good when the independence of the forecast group is ensured. This has fortunately been the case in Germany since in 1955.
The tax revenue forecast in Germany has been carried out in its current form since 1955. The occasion for the establishment of the Working Group was a public debate on the amount of expected tax revenues between the federal government and the Ifo Institute. The Ifo Institute doubted the Finance Ministry’s estimate and expected a higher amount of revenue in spite of an extensive tax reform.
Subsequently, the Federal Minister of Finance agreed to include the economic research institutes, DIW Berlin, Ifo and the Kiel Institute for the World Economy, in the group of tax revenue forecasters, along with the Bundesbank. Over its 55-year history, the Working Group has been expanded to include the above-listed organisations, all of which contribute their experience to the tax revenue forecasts that are so important for budget planning. The discussion of the Working Group examines the estimation proposals of the Ministry of Finance, the economic institutes, the Bundesbank and the German Council of Economic Experts.
Since 1955 the federal government has incorporated the results of the Working Group into its budget plans and since 1968 also into its medium-term financial planning.
Current Forecast Since November 2008 the results are published in ifo Schnelldienst: Archive
Lehmann, Robert, "Die Steuerschätzung in Deutschland - eine Erfolgsgeschichte?", ifo Dresden berichtet 17 (03), 2010, 34-37 ( Abstract / Download )
Büttner, Thiess and Björn Kauder, "Steuerschätzung im internationalen Vergleich", ifo Schnelldienst 61 (14), 2008, 29-35 ( Abstract / Download )
Büttner, Thiess and Björn Kauder, "Revenue Forecasting Practices: Differences across Countries and Consequences for Forecasting Performance", CESifo Working Paper Nr. 2628, 2009 ( Abstract / Download )
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