City heads for new all-time high in trade tax

According to current interim figures, the City of Offenbach can expect a record result for trade tax this year. According to city treasurer Martin Wilhelm, trade tax amounting to around 133 million euros had been collected by the end of July - more than ever before in Offenbach's history. At the same time, however, the city's expenditure continues to rise, which is why the financial situation remains "extremely tense", according to Wilhelm.

As trade tax is generally subject to very strong annual fluctuations, a forecast is always associated with great uncertainties. Higher sums were already expected for the current budget than in the previous year. Due to the generally poor economic situation, the municipal treasurer's office had assumed 95 million euros in its forecast for the 2025 budget.

"The fact that our income is increasing in a phase of recession in Germany underlines the economic dynamism of many companies based in Offenbach. However, it is also an indication that Offenbach as a business location has bottomed out," explains City Treasurer Martin Wilhelm, adding: "Thanks to the recent successes of our active settlement and location policy, we can expect the Offenbach economy to continue to strengthen in the coming years. Of course, global developments will not completely bypass Offenbach in the future either. In the long term, however, there are good prospects for Offenbach as a business location. What we need are companies in future-proof sectors, because our aim is to increase the number of jobs in Offenbach in the long term. This is extremely important for financing the city's tasks and helps to reduce dependence on other sources of income in the long term."

A look at the past shows how strongly the amounts from trade tax fluctuate, especially during economic crises. For comparison: the previous record year was 2023 with 122.4 million euros. One year earlier, in 2022, it was 75.6 million euros, in 2021 85.2 million euros and in 2020 only 52.7 million euros. The amount was also comparatively low in 2019 at 61.7 million euros.

One reason for the high deviation this year is high changes for previous years, which amounted to around 42.7 million euros. This was mainly due to higher settlements from previous years.

Normally, the average changes from previous years are around 10 million euros per year. For this reason, we can currently assume that trade tax will remain relatively stable at around 100 million euros. This year, the figure is pleasingly high. In addition, there is currently a one-off effect of 10 million euros. This shows why a trade tax forecast is so difficult.

Despite higher trade tax, the city is still heavily reliant on allocations from the municipal financial equalization scheme - as with the state financial equalization scheme, this is intended to compensate for financial inequalities between municipalities at federal state level. These funds are still the largest revenue item for Offenbach - but they are also subject to annual fluctuations. Put simply, the more revenue the city was able to generate from its own resources in the previous year, the more the allocations from the KFA decrease in the following year. "As an example: If we gain one euro in trade tax, we lose around 70 cents in KFA funds. This means that the one euro from trade tax cannot be booked one-to-one on the credit side, but it also reduces the contribution from the KFA. Nevertheless, it is of course worth focusing on new settlements and higher business taxes, as these strengthen the city in the long term," says Wilhelm.

Despite the current record sum and the positive development, city treasurer Wilhelm warns against exaggerated expectations: "Higher business tax assessments will reduce the allocations from the KFA next year. The city's fundamental dependence on these sources of financing, which are often subject to external factors, will therefore not change. However, they can give the city some breathing space: If the record actually materializes at the end of the year, we have the chance to increase our reserves again. This is because the city's reserves will have already been significantly reduced by 2024 and - as things stand today - will be exhausted by 2029 at the latest. If the delta between income and expenditure does not turn positive, the city's financial capacity to act will be at risk in the long term. We would then only be able to fulfill our statutory duties - we would no longer be allowed to spend money on anything else."

Wilhelm is particularly concerned about rising expenditure. The reasons for this include inflation-related cost increases, higher interest rates and rising personnel expenses. In addition to the renovation and new construction program for schools and daycare centers, the city will have to invest an additional 100 million euros in all-day care at elementary school. The challenges in the social sector also remain immense. Like all-day care, these are also among the city's compulsory tasks.

Wilhelm also refers to developments in other municipalities. For example, the Bertelsmann Foundation's recently published "Municipal Finance Report 2025" describes the current development in Hesse as the "largest deficit in the history of the Federal Republic of Germany". Hesse has the highest per capita deficit in a nationwide comparison of federal states. In 2024 alone, expenditure has risen by ten percent. Social spending has even risen by 25 percent within two years, but often remains without corresponding counter-financing from the federal government. The federal government's planned special fund for infrastructure must therefore largely flow to the municipalities, Wilhelm continued. Nevertheless, he also emphasizes: "The structural underfunding, the increasing mandatory tasks and the massive need for investment, for example for schools, daycare centres or infrastructure, cannot be permanently compensated for by one-off revenue peaks."

Wilhelm is therefore once again appealing to politicians at federal and state level to take greater account of the financial situation of municipalities under particular pressure. "The investment booster was a good signal to the municipalities because the new federal government has assumed the full costs of their laws. This was often not the case in the past and must continue to be compensated. We still urgently need a change to the system for sustainable relief, for example through a fair old debt regulation and a reform of the municipal financial equalization system."