Offenbach rejoices: record trade tax revenue despite crises!

Offenbach rejoices: record trade tax revenue despite crises!

What is happening in Offenbach? The city is facing a financial boom: the treasury is eyeing trade tax revenue of an estimated 95 million euros for the 2025 budget. Even more impressive is the forecast for 2023, where record revenues of 133 million euros are expected - an amount that could remain unmatched in Offenbach's history. These positive figures are encouraging, but city treasurer Martin Wilhelm (SPD) appeals to citizens to look at the situation realistically. “The city’s expenses are also rising sharply,” he warns, describing the financial situation as “extremely tense.” However, there is a ray of hope: the increase in trade tax revenue shows the economic dynamism of many companies in the region.

Trade tax is one of the most important sources of income for municipalities in Germany. The regulation of this tax is anchored in the Trade Tax Act (GewStG) and affects both natural and legal persons who operate commercially. The tax rate, which is at least 200% of the trade tax base, varies depending on the municipality and can change significantly depending on the economic situation. Many municipalities are currently benefiting from additional payments, which in Offenbach amounted to 42.7 million euros - normally these additional payments were around 10 million.

The volatility of trade tax

Trade tax revenues are known to fluctuate greatly. There was a decline to 75.6 million euros in 2022, while a rapid recovery to 133 million euros is expected for 2023. This volatility is often based on economic development and the corresponding additional payments from companies. Wilhelm still sees a “relatively stable” estimate of around 100 million euros for Offenbach - although the uncertainties surrounding global developments cannot be ignored here either.

The city of Offenbach also remains dependent on allocations from the municipal financial equalization, which make up the largest income item in the budget. An increase in trade tax can paradoxically reduce allocations. For every euro more in trade tax, there is around 70 cents less in KFA allocations. It is therefore essential for Wilhelm to continue to actively attract companies and increase income from trade tax in order to sustainably improve the financial situation.

Public services in focus

A healthy business tax base enables municipalities to finance important public services and maintain the quality of life of their citizens. While the trade tax represents a lifeline for cities and municipalities, there is also growing pressure on companies that could suffer from high tax rates. The competitiveness of smaller companies in particular can be impaired by high trade tax rates. Especially in times of internationalization and digitalization, voices are becoming louder calling for a reform of trade tax in order to optimize the balance between the tax burden and company growth.

In conclusion, it should be noted that Offenbach has retained a good hand in the current situation, but the challenges should not be underestimated. The city plans to have reserves to cover future deficits, but those could be exhausted by 2029 if the revenue-to-expenditure ratio doesn't improve. It will remain exciting to see how the situation develops and what measures are taken to secure Offenbach's economic prospects in the long term.