The state benefits significantly from inflation.

What many have suspected can soon be read in black and white.

According to the calculations of the Federal Ministry of Finance, additional tax revenue of more than 20 billion euros can be expected this year and next, with no corresponding increase in the economic performance of citizens and companies.

These figures can be found in the draft for the fifth tax progression report prepared by the Federal Ministry of Finance.

Manfred Schaefers

Business correspondent in Berlin.

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The so-called departmental vote is currently underway.

If the other ministries have no objections, the cabinet should adopt the report next week.

It is an important basis for adjusting the tax rate.

Finance Minister Christian Lindner (FDP) has already announced that he will adjust the Inflation Compensation Act accordingly, with which the federal government wants to compensate for the cold progression.

The FDP politician can say more about this this Thursday.

Then he will present the figures from the latest tax estimate.

Additional income of around 23.4 billion euros

Income tax in Germany is structured in such a way that citizens have to pay more to the state if they earn more.

The tariff is progressive.

However, this also means that taxpayers slip into a higher burden in a time of rising prices, even though they can no longer afford them with their real income.

This is called cold progression.

The new report examines how high the additional tax revenue from higher incomes is, which compensates for inflation, i.e. does not change real incomes.

For this year, the experts estimate this additional income at around 23.4 billion euros.

The basis is an assumed inflation rate of 7.2 percent.

"At an individual level, around 35.5 million taxpayers will be affected by the cold progression in 2022 with an average of around 659 euros," the report says.

Inflation of 6.3 percent and a cold progression effect of 21.5 billion euros are expected for 2023.

The individual is affected with an average of 606 euros.

Since the relief measures taken in previous years to compensate for the cold progression are still having an effect, the ministry assumes EUR 20.4 billion and EUR 21 billion for the two years that still have to be compensated.

The basic allowance should increase

As has already been leaked, the basic tax-free allowance is to increase from the current 10,347 euros to 10,908 euros at the turn of the year, i.e. the part of the income that remains tax-free for all adults.

At the same time, the child allowance is to be increased by EUR 404 to EUR 6,024.

The new tax estimate should also confirm the knowledge that the state is benefiting from the currently particularly high inflation with its tax revenue.

A significant plus is expected for the federal, state and local governments – even though the economy is likely to slide into a recession.

There was talk of more than 100 billion euros for 2022 and the next five years, in total for the three levels of the state.

The members of the working group will work for three days on the exact forecast, which will contain the expected revenue for each type of tax up to and including 2027.

The result is the basis for the budget consultations in the federal and state governments.

At the end of November, the Bundestag intends to complete its legislation on the 2023 budget.

Next year, the traffic light wants the debt rule to take effect again - not least with the help of sub-budgets that have been pumped full of credit authorizations in advance.