Families can look forward to more money, consumers to less taxes when shopping. The Bundestag passed the new corona stimulus package. But the opposition doubts whether it will work.
The Bundestag has passed important parts of the economic stimulus package that should boost consumption and the economy in the Corona crisis. Parliament approved the changes with the votes of the grand coalition. So that they can enter into force on July 1, the Federal Council is expected to agree later in the day.
A reduction in VAT is intended to strengthen the weakened purchasing power due to the corona pandemic and short-time work. By the end of the year, instead of 19, there would only be 16 percent VAT on purchases. The reduced rate, which applies to many groceries and everyday goods, is reduced from seven to five percent. Many supermarkets, car and furniture stores have already announced that they will pass the savings on to their customers one-to-one – in some cases, prices have already been reduced at the beginning of the week.
Opposition criticizes the tax cut as ineffective
The opposition nevertheless criticized the temporary tax cut as largely ineffective. For the retail trade it means “absurd bureaucratic effort”, at the same time an average household saves just 30 euros a month, said FDP parliamentary group leader Christian Dürr. Left Party and Greens doubted that the savings will really reach the consumer. It was a daring, unpredictable bet. The AfD also questioned economic stimulus.
AfD and FDP voted against the law. The Greens and the Left Party abstained.
300 euros more child benefit
The second major component of the stimulus package is a bonus of 300 euros for each child entitled to child benefit. The first 200 euros are to be paid with child benefit in September, the remaining 100 euros in October. The child bonus is not counted towards the basic security, but is offset against the tax-free child allowance for higher earners, so that families with less money benefit in particular.
For single parents, who were particularly heavily burdened during the crisis, the so-called relief contribution in 2020 and 2021 will be increased from 1908 euros to 4000 euros. This works like an allowance.
Gastronomy benefits from double reduction
Restaurants and inns benefit again. The VAT rate has already been set for them for food reduced from 19 to seven percent – for a limited period from July 1, 2020 to June 30, 2021. Due to the further, temporary reduction in VAT for the six months to the end of the year, the reduced tax rate of five percent therefore applies in the catering industry.
There are further facilities for companies, for example through changed depreciation rules. In addition, they should be able to offset current crisis-related losses better with profits from the previous year and thus have more money in the checkout in difficult times.
The federal government is making even more debts
The federal government bears most of the costs for the economic stimulus package: Almost 13 billion euros in tax losses will result from the reduction in VAT, and the children’s bonus will add another 5.4 billion euros. To solve this, Finance Minister Olaf Scholz wants to take out more loans. In the meantime, record debts of 218.5 billion euros are planned for 2020. The Bundestag is scheduled to adopt the second supplementary budget later this week.
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