European Economy. Economic Papers. Germany's growth performance in the 1990's

91
92
93
94
95
95
97
98
99
00
Revenues (in % of GDP)
Of which:
44.1
45.5
46.2
46.6
46.1
46.1
46.6
46.6
47.4
47.1
-Taxes on products & imports
11.1
11.1
11.5
11.8
11.4
11.4
11.4
11.6
12.2
12.1
-Taxes on income & wealth
11.4
11.7
11.5
11.0
11.1
11.5
11.2
11.5
12.0
12.5
-Soc. Sec. Contribution
17.2
17.6
18.2
18.6
18.8
19.4
19.7
19.3
19
18.7
p.m. Tax burden
40.7
41.5
42.1
42.5
42.3
43.2
43.2
43.2
44.0
44.0
Source: Commission sources (AMECO)
Table 2.4: Social Security Contribution Rates (West Germany only)
Total
Pension
Unemployment
Sickness
Old age
1990
35.6
18.7
4.3
12.6
-
1993
37.4
17.5
6.5
13.4
-
1996
40.9
19.2
6.5
13.5
1.7
1997
42.0
20.3
6.5
13.5
1.7
1999
41.4
19.7
6.5
13.5
1.7
2001
40.9
19.1
6.5
13.6
1.7
Source: Deutsche Bundesbank and Federal Ministry for Labour and Social Affairs
2.2.3 Composition of expenditure
The rise in the overall expenditure ratio masks some interesting developments. Notably, social
benefits and interest payments rose strongly (Table 2.5). While the later is due to the huge rise
in public debt resulting from the way re-unification was handled economically, the rise in social
benefits is the more interesting development. It is clearly larger than the rise in social security
contributions described above. At first glance, such a development appears to contradict the
basic principle of the German social security system, which stipulates that in case of higher than
expected expenditure the contribution rates would have to rise in the short-term. This did not
occur because the divergence between the expenditure and revenue side in the social security
system was balanced by increased transfers from the general budget. In the early 1990s, this was
justified by the fact that especially the pension system had to shoulder burdens linked to re-
unification and the integration of so-called ‘ethnic Germans’, who where entitled to pension
payments but had never paid contributions. In 1999, the introduction of the so-called ‘ecological
tax’ to finance the decrease in pension contribution rates has further increased the tendency to
finance the social security system out of the general budget.