Berlin – In view of collapsing tax revenues as a result of the Corona crisis, the German Association of Cities and Towns has called for a “municipal rescue package”.
“The corona pandemic is causing serious financial burdens in all cities: revenues are falling, expenses are increasing,” said Burkhard Jung, President of the German Association of Cities, of the German Press Agency. «There are already significant drops in trade tax. After the important help for business, trade and the self-employed, the municipalities also need financial support.
The Mayor of Leipzig said that the city council fears a deficit in German municipalities in the double-digit billions for 2020. “We urge the federal and state governments to work together to ensure that the cities’ ability to act and the liquidity of the municipal funds are ensured.”
The federal government had decided to provide comprehensive economic aid to protect companies and jobs. Jung said that a rescue umbrella for the municipalities must now be opened. “Even after the crisis, people want to live in cities and towns that can provide their citizens with good services of general interest.”
The corona crisis has massive economic consequences, Germany will fall into a recession from the perspective of the federal government and leading economists. Many stores had to close, orders and sales of many companies collapsed. This also hits the cities hard, whose most important source of income is trade tax.
Jung said that municipal revenue is falling sharply: currently with trade tax, soon also with income tax. “There are also declines in childcare contributions, loss of income in libraries, swimming pools, and theaters.” Many events were canceled during the crisis, theaters closed.
According to a current survey by the German Association of Cities, applications from companies have been received in all 40 cities surveyed to defer trade tax or to reduce advance payments. “Based on these results, we are already anticipating a drop in trade tax revenue of more than ten percent compared to the previous year,” said Jung. «And this decline will be much bigger. Because that’s just a snapshot a short time after the severe shutdown of public life. »
The applications that are currently being processed by the tax offices are not yet considered. “And in the next few weeks, further deferrals and corrections to the advance payment of trade tax are expected.”
Another survey of the city day with around 200 cities showed that more than half of the cities are forced by the Corona crisis to severe restrictions in the budget management. «A quarter of the cities surveyed are planning to block budgets or have already decided on them. More cities are adopting other budget management measures. This severely limits expenditure that was previously planned and decided. »
On the other hand, the municipalities nationwide increased due to the immediate need to deal with the crisis, for example in the health offices, according to Jung. In the near future there will also be significant increases in social spending, and the municipalities would have to pay at least an additional two billion euros in terms of accommodation costs for recipients of basic security for jobseekers alone. «The cities also support many local companies and a large number of privately funded institutions and associations with their own measures and resources. In this way we want to prevent important structures for urban society from breaking down. »
The already critical situation is exacerbated for structurally and financially weak cities. «Before Corona, their households were often heavily burdened by structural debts. You will still need a clear haircut to be able to get back on your feet after the crisis. Therefore, the problem of old municipal debts must remain on the agenda and be solved, »said Jung. Before the Corona crisis, the federal government was already debating how to relieve the municipalities of old debts.
In addition to the municipalities, municipal corporations also ran into financial difficulties as a result of the corona pandemic, said Jung: «For example, the existence of transport companies, trade fairs, airports, event centers, harbors, zoos and cultural institutions are threatened in part by loss of income. Municipal companies should therefore definitely have access to the liquidity aids and loan programs from the federal and state governments that have been launched for the economy. »
