Algunas referencias a la justicia arbitral.

G

Tax revenues will rise much stronger than nominal GDP in 2007 as was already the case in 2006. The increase of tax revenues will amount to 10.7 per cent (cash basis, not in terms of NIPA) (Graph 2.2.1), while GDP will probably increase by 4.2 per cent. The tax ratio which had declined in the early 2000’s rose by 1.3 percentage points (2006: 21 per cent; cash basis). It reached the level which had been “normal” in the 1990’s.

The increase in taxes on capital income (corporate income tax, assessed income tax, withholding tax on dividends and interest income) will be very high in 2007 (Graph 2.2.2), at an expected 14.5 per cent. Besides, the revenues of the Gewerbesteuer (tax on profits and on parts of interest paid by firms) will increase by 20 per cent in 2007. VAT revenues have continued to rise more rapidly than private consumption, their most important determinant (Graph 2.2.3).

It is not yet clear why tax revenues surged in 2006 and 2007. There are only some elements of an explanation:

1. Taxable incomes and taxable profits were higher than expected due to an underestimation of the effects of tax base broadening measures (e.g. restrictions to carrying losses forward) which had been decided upon in recent years.

2. Due to the lag structure of assessed taxes, there was a reaction on the poor development of assessed tax revenues in the period 2002–2004.

3. As a result of the upswing, the number of insolvent firms went down. In addition, the fight against tax fraud seems to be successful to some extent. Thus, losses of VAT revenues probably were much smaller than in the previous years.

Overall, tax revenues developments in 2006 and 2007 may have been a kind of reaction on the poor development in the period 2002–2005. We do not expect a further strong increase of tax revenues in 2008 and 2009. In addition, the reform of business taxation will lead to a loss of revenues in the range of 6.5 billion euros in 2008 and somewhat less in 2009.

Figure 2.2.1: Tax Revenues in Germany 2000-2007

2000 2001 2002 2003 2004 2005 2006 2007 20 30 40 50 60 70 Bill. € moving avergage

Figure 2.2.2 Capital Income Tax Revenues in Germany 2000–2007 2000 2001 2002 2003 2004 2005 2006 2007 0 2 4 6 8 10 12 14 16 18 -2 Bill. € moving avergage

Source: Federal Ministry of Finance.

Figure 2.2.3 Private Consumptiona _{and VAT Revenues}a _{in Germany 2000–2007}

2000 2001 2002 2003 2004 2005 2006 2007 280 300 320 340 360 Bill. € 33 35 37 39 41 43 Bill. € VAT Revenues (right scale) Private Consum ption

a_{Seasonally adjusted.}

Source: Deutsche Bundesbank.

I

The improvement in general government net borrowing in 2006 was unexpectedly large, from 4.1 to 2.4 pp of GDP (excluding the extraordinary burden related to the judgment of ECG concerning VAT, 1.2 pp, and the decision to cancel the State’s claims on TAV Spa, 0.8 pp), while the government estimate published in the Stability Programme update in December 2006 was by 3.6 per cent. The decrease of deficit reflected the increase of fiscal burden by 1.7 pp of GDP, from 40.6 to 42.3 per cent, with a contribution of the tax components near to 1.6 points.

The divergence with respect to the forecasts in SP updates is only partly due to a more favourable economic growth (1.9 versus 1.6). The increase in tax revenues was larger than forecasted and larger than would have been consistent with the changes in the corresponding bases. The infra annual information on tax receipts has determinate several upward revisions in the forecasts of tax revenues growth, as the table below shows:

Table 2.3: General government – taxes (rate of growth)

Forecasting and Planning Report - October 2005 2.6 Quarterly report on the Borrowing Requirement - April 2006 4.2 Economic and Financial Planning Document - July 2006 5.9 Forecasting and Planning Report - October 2006 6.8

Outturn, ISTAT March 2007 10.0

In general, the growth of tax receipts in 2006 is evidence for the sharp increase of elasticity of revenues with respect to GDP. Taxes increased by 9.5 per cent, 8.9 per cent net of one-off, while nominal GDP increased by 3.7 per cent. Figure 2.2.4: Elasticity of Revenue with respect to GDP

-1 0 1 2 3 4 5 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 net of one-off

The elasticity in 2006 is close to the values of 1992-1993 and 1997-1998, when budgetary consolidation was intensified and structural changes in taxes were enacted primarily with the aim of increasing revenues (the revisions of VAT and personal income rates and the curbs on the correction of fiscal drag in 1992-93; the tax system reform in 1998). On the contrary, in 2006 the measures enacted did not involve changes in tax rates.

More in detail, according to our estimation the growth of tax revenues in 2006 can be attributed to several factors, which we can group in four categories:

Table 2.4 Composition of additional tax revenues, in % of GDP

Macroeconomic growth 0.9%

Discretionary measures 0.6%

One-off and extraordinary items 0.6%

Other items 0.5%

Total 2.6% At first, we take into account the effects of macroeconomic recovery, which

explains a 30 per cent of the total growth in fiscal receipts. A 23 per cent of the growth can be attributed to the measures of Budget Law and other discretionary fiscal measures implemented by government in 2006. A further class includes extraordinary and temporary factors. In this group we can set direct tax receipts paid by public employees on back payment in the first part of the year, tax on insurance companies’ mathematical provisions, increase of the taxes on capital income due to the large increase in redemptions of post office savings and the effects of the increase in the prices of oil and other energy products on VAT.

The latter group corresponds to the un-explicated fraction of major receipts. Trying to give reasons for this residual increase of revenues, we made some exercises with Prometeia’s macroeconomic model. If we run the budgetary equations of the model with the tax basis and other economic variables at their historical values, we can test for the presence of a structural break of the budgetary equations. All in all, this analysis seems coherent to an increase of taxpayers’ compliance due to the intensifications of the measures to fight tax evasion and avoidance. This is particularly noticeable in the growth of VAT and personal income taxes.

More in detail, for direct taxes the total error which came from the model was about 70 per cent larger in 2006 estimation than in the previous five years. If we do not include the one off revenues, the error decreases, but it remains 35 per cent larger than in the previous years anyway.

Among direct taxes, personal income taxes grew by 6.3 per cent, while salaries and pensions grew by 3.7 per cent. The observed elasticity from 1 per cent calculated in the last two years is by 1.9 per cent in 2006. This effect seems to confirm an increase in the reactivity of tax receipt to personal income (fiscal drag was estimated about 2 billion of euros) caused by previous reforms and measures aimed to broaden the taxable base of self-employed.

Also receipts of the taxes on capital income grew sharply, by 36.4 per cento, 28.3 per cent net of one-off factors (redemptions of post office savings), but in this case the rise is consistent with the growth in the tax base.

For indirect taxes we have a similar outcome. In 2006 estimation, the equations error is by 50 per cent larger than in the previous five years, 32 per cent if we do not consider one-off revenues.

The increase of VAT was particularly large, 9.2 per cent, while the related consumptions in national account data increased by 3.2 per cent. The observed elasticity of VAT revenues with respect to the tax base grew from the average of 1.5 of the previous two years to 3. This increase could reflect in part the shift in the composition of household spending towards durable goods, which are subject to higher VAT rate, and the role of large-scale retailing, which reduces the possibility of evading VAT. In the model equations, the observed increase of elasticity of VAT can explain about of 80 per cent of the increase in error on indirect taxes estimation.

N

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