Tax estimate: plus for the state, minus for municipalities

The tax estimate for Saxony is contradictory. While the state can expect a total of 121 million euros more in 2025 and 2026 compared to the last forecast last fall, the municipalities are expected to receive 115 million euros less. This was announced by Finance Minister Christian Piwarz (CDU).

According to estimates, 19.7 billion euros in taxes will flow into the Free State's coffers this year and 20.3 billion euros next year.

Additional revenue for the state should compensate for the deficit of the municipalities

According to Piwarz, the increase in tax revenue for Saxony is also the result of a one-off special effect. Due to a significant inheritance in another federal state, there was a redistribution in the federal state financial equalization system. Saxony is expected to receive 130 million euros. The current May tax estimate confirms Saxony's previous budget plans. Piwarz intends to propose to the state parliament that the municipal deficit be offset with the additional revenue for the state.

Saxony deviates from the federal trend, at least in terms of revenue for the state. According to tax estimates, the new black-red federal government must expect 33.3 billion euros less tax revenue by 2029 than was expected in the fall of 2024. For the state as a whole, i.e. the federal, state and local governments combined, the tax estimators predict a shortfall of 81.2 billion euros over the same period.

Minister speaks of a black eye and a black zero

According to Piwarz, Saxony has got away with "a black eye" or a black zero. The minister spoke of a "slight easing of the burden". At the same time, he also pointed out uncertainties. With the announcement of massive tariffs by US President Donald Trump, the outlook had clouded over once again.

"No more growth is expected for 2025. The economic engine could not start up again until 2026," emphasized Piwarz. Additional growth impetus should also be provided by further measures planned by the new coalition government in its coalition agreement. "However, some of these measures are also associated with additional tax revenue risks."

According to the Ministry of Finance, the lowered growth expectations in the new estimate will have a negative impact on profit-related taxes. Wage tax is also expected to be weaker. There are positive effects from consumption and therefore sales tax, and the development of real estate transfer tax is also clearly on the up again, the ministry added.

Declining trade tax revenue is a burden on local authorities

For local authorities, on the other hand, the picture is less positive, according to the ministry. The main reason for this is the weak economy, which is having a considerable negative impact on the development of trade tax revenue nationwide. "Municipal tax revenues of 5.0 billion euros are expected in Saxony for 2025 and 5.2 billion euros for 2026. For both years together, this is 116 million euros less than estimated in October 2024," the ministry announced.

Piwarz promised support. "Even in difficult times, we stand by the principle of equality and the Free State's partnership with the municipal family. The Saxon financial equalization scheme can fully compensate for the expected shortfall in revenue for the municipalities in 2025/2026." He will discuss a corresponding proposal for increasing the municipal financial equalization with the governing coalition.

Minister pessimistic about the future

Piwarz was pessimistic about the development of public budgets in the coming years. "There is no reason to sound the all-clear, no reason to be optimistic in any way." There will still be tough years ahead in terms of tax revenue.