From July 1st: 16 instead of 19 percent VAT. How Würzburg dealers implement the measure and why there will still be bankruptcies.
VAT will be reduced in Germany from July 1st. Instead of 19 percent, customers now only pay 16 percent. Goods that belong to basic needs or serve the common good cost only five percent VAT instead of seven. The federal government wants to boost consumption, lower prices and ultimately relieve the financial burden on citizens. But does that really make the goods cheaper and how does retail in Würzburg handle them? For this purpose, this editorial team asked around various participants.
The Schlier fashion house in Domstrasse, for example, passes the reduction directly on to customers. However, the company does not label all prices again, also because the VAT reduction will be reversed from January 2021. Instead, just 16 percent VAT is charged at the checkout instead of 19, which corresponds to a price reduction of 2.52 percent when calculating the total price. In addition to the question of whether to change all the labels or not, there are also problems for some retailers when changing the checkout system, reports Volker Wedde from the Lower Franconia Trade Association.
“If all retailers pass the cut on to end users, this measure can be a success.”
Carl Schlier from the Schlier fashion house–
“If all retailers pass the cut on to the end consumer in full, this extraordinary tax reduction measure can be a success,” Schlier hopes. It is particularly important to him that customers spend their money in the region. Wolfgang Weier, Managing Director of city marketing “Würzburg is fun” also believes in the positive effect of this measure. Weier also checked out the companies in the city and found out that the majority of them passed the VAT reduction on to customers. Many proceed like the Schlier fashion house and deduct the prices at the checkout. The large discounters and chain stores in Würzburg, who do not always determine their own prices, also want to cut costs, according to Weier.
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Ultimately, it does not matter to Weier how or whether the companies pass on the reduction: “If a company keeps the three percent so that jobs are saved and the money is passed on to the employees who then spend it again, this also has a positive effect . ” Customers who want to make larger investments, for example, buy a car, will notice the difference quickly, but “even with small purchases, the three percent will eventually spill over,” says Weier.
Sport runs great, the textile industry has problems
Volker Wedde also agrees with Weier and hopes for growth in Lower Franconia. Heiko Gesella, managing director of the Zeitzeichen clothing store on Barbarossaplatz, does not understand the federal policy measures, at least for his branch. “In summer sales, we sometimes reduce by 30 to 40 percent, so the three percent make no difference to us,” Gesella said. Nevertheless, three percent is deducted from the cash register at the time sign. In general, the textile trade is the branch that has the most problems with the current situation. Other areas, such as sports shops, are doing great, reports Weier.
“I am a little horrified of the future,” Weier is still quite pessimistic at the beginning of the conversation. Weier fears an insolvency wave, especially if the state’s special regulation on bankruptcies expires at the end of September. The state had suspended the bankruptcy filing until autumn. As a result, the number of bankruptcies during the corona pandemic has even decreased. Weier hopes that the federal government will extend these trade measures until the end of the year. Then the strong Christmas business could save many companies.
Weier fears many bankruptcies
The reduction in VAT will also help, according to Weier. “The ailing three percent will perhaps help ailing companies,” said the Würzburg location marketing boss. For Weier, two factors play a role. The frequency in downtown Würzburg, which is also measured using a laser in Schönbornstraße, is currently around 70 percent – weather-related swings up and down are excluded. Together with the decreased desire to buy due to the uncertain situation in the corona crisis, this creates a problem.
“With that we would get away with a black eye in Würzburg.”
Wolfgang Weier, City Marketing “Würzburg is fun”–
According to internal calculations, Weier assumes that service providers will go bankrupt seven to ten percent; in owner-operated retail and catering, it could hit ten to 15 percent in Würzburg. “With that, we would get away with a black eye in Würzburg,” said Weier. Large chains and chain stores are of course less affected than small owner-operated shops. Structurally weaker regions would hit the crisis harder than Würzburg. This is also the opinion of the Würzburg economics professor and former economist Peter Bofinger, according to Weier. And so in the end he is cautiously optimistic that the Würzburg trade with its almost 1,000 stores is coming through the crisis well.
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Würzburg
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Tim Eisenberger
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Federal policy
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Coronavirus
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service provider
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retail trade
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Retailers
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Dealer
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Bankruptcies
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Customers
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Peter Bofinger
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States
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Stadtmarketing Würzburg is fun
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Textilhandel
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Volker Wedde
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Business sector clothing and textiles
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Wolfgang Weier
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Würzburg is fun
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