Some millions are missing - More savings: Berlin calculates with tax shortfalls
Berlin is expected to have less money than planned due to tax relief measures brought about by the Federal Government. For the years 2025 and 2026, a shortfall of approximately 900 million Euro is anticipated, according to a spokeswoman for the Finance Administration, as quoted by "Tagesspiegel".
The background is a legislative proposal that the traffic light government passed last week. It includes, among other things, increasing the tax-free allowance for income tax and the child tax allowance - as a result, tax revenues are expected to decrease nationwide. The legislative proposal must still be approved by the Bundestag and Bundesrat.
According to the plans of the Federal Cabinet, the tax-free allowance, on which no income tax is payable, should be increased to 11,784 Euro this year, retroactively. In the following year, it should rise to 12,084 Euro, and to 12,336 Euro in 2026. The child tax allowance should be increased to 6,612 Euro in this year, to 6,672 Euro in the following year, and to 6,828 Euro in 2026.
The red-green coalition government must save around 3 billion Euro for the budget year 2025 anyway. Added to this are an additional 450 million Euro that Berlin will lose due to the latest census data. Since Berlin has fewer inhabitants than assumed, the state receives correspondingly less money from the Federal Government. The pressure to save therefore continues to increase.
- The cost-saving measures, such as increasing the tax-free allowance and child tax allowance, implemented by the Federal Government as part of the legislative proposal, are expected to result in a tax relief for households nationwide, leading to a decrease in tax revenues.
- Despite the anticipated tax relief, Berlin is facing a significant shortfall of approximately 900 million Euro for the years 2025 and 2026, which has been highlighted by the Finance Administration and reported by "Tagesspiegel".
- The Senate in Berlin, aware of the financial constraints, must navigate the pressure to save around 3 billion Euro for the budget year 2025, compounded by an additional 450 million Euro loss due to the latest census data, revealing fewer inhabitants than anticipated, resulting in less funding from the Federal Government.
- The legislative proposal, including these cost-saving measures, still needs to be approved by both the Bundestag and Bundesrat before it can be fully implemented, which could potentially alleviate some of the financial burdens faced by Berlin.
- The financial challenges facing Berlin due to the tax relief measures and other factors have sparked concern in Germany, with media outlets like "Tagesspiegel" closely monitoring the situation and its potential impact on the overall German finances.
