Berlin.
VAT is to be reduced – and soon. What does this mean for you as a consumer and how do you benefit from it?
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- VAT is to be reduced – to 16 and 5 percent respectively
- In particular, people who buy expensive goods will probably benefit from the VAT reduction
- When exactly will the VAT be reduced? What does the grand coalition expect from this? And what does the reduction mean for you as a consumer? We have all the information.
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Companies in Germany need less for half a year value added tax numbers. The coalition has that within the framework of the Stimulus package decided. The hope that goes with it: Businesses pass the tax reduction on to consumers and consumption is boosted. However, whether this works that way is controversial.
How is VAT reduced?
You pay VAT in Germany every time you buy something. In the supermarket, it is usually not on the price tag, but only on the receipt. Even with larger purchases, for example in a furniture or car dealership, you can see them on the invoice. There are two different sentences: the regular of 19 percent and the reduced by 7 percent for basic necessities that should be particularly affordable. Both tax rates should now be reduced – to 16 or 5 percent.
How long is the tax cut?
The new tax rates should apply from July 1st to December 31st. The party leaders of the CDU and SPD exclude an extension of the planned value-added tax cut beyond the end of the year. “The impulse that the buying mood is stimulated by this comes primarily from the fact that the reduction is limited in time,” said CDU boss Annegret Kramp-Karrenbauer. SPD leader Norbert Walter-Borjans also emphasized: “It is now definitely set: it will go down for half a year.”
Does this save me money as a consumer?
That is the goal – but it is still not entirely certain. Vice Chancellor Olaf Scholz (SPD) has asked the trade that Pass on tax cuts to consumers – but he cannot force business.
The head of the economic policies, Lars Feld, has expressed doubts about the meaning of the lowering of VAT agreed by the grand coalition. “Consumption will only stimulate the reduction in VAT if it is passed on in the prices,” said Feld our editorial team, referring to negative experiences with the tax privilege for hoteliers. The “famous Mövenpick tax” was “hardly ever passed on to customers”.
Annegret Kramp-Karrenbauer said: “We rely on the reason and the wisdom of the companies themselves and of course also on the responsible consumers.” Especially in the case of goods with the full VAT rate and for high-priced products, the reduction is definitely important. “No smart company” wants to risk debates with disgruntled customers, Kramp-Karrenbauer was convinced. They rely on “swarm intelligence” of consumers and also the watchful eye of consumer protection organizations. VAT cut causes trouble: Why bankruptcy threatens
Walter Borjans RTL and n-tv also told the stations that it was “up to the consumer to make sure that if prices don’t go down, you can switch to other things or just tell your dealer.”
“The nice thing about the VAT reduction is that it not only refers to the large purchases, but also to the costs of everyday life,” said Walter-Borjans. That is why it was important to the SPD that the reduced tax rate, “which is placed on things of daily needs,” also falls.
The example of Great Britain shows how it could work. Here, the value added tax was temporarily reduced in the 2009 financial crisis. According to a study, retailers passed 75 percent of it on to consumers.
• Background:
Who benefits most from the Corona stimulus package
How much could the savings be?
The more expensive you shop, the more you can theoretically save. With a bottle of juice for now 99 cents, the tax cut is two cents, with a washing machine for 700 euros it is already 15 euros. If the retailer leaves the sales price the same, he makes more profit accordingly – if he changes it, consumers save. It is still unclear whether a supermarket will move away from advertising-relevant prices such as 1.99 euros.
Who benefits most?
In absolute numbers, those will save a lot of money, who buy expensive – So probably high earners. At the same time, VAT is often the only tax for low earners that they pay in any significant amount. According to a DIW study, value added tax disproportionately burdens households with low incomes – the reduction would also be disproportionate to them.
• Comment:
Economic stimulus package with “Wumms”: fireworks or straw fire?
Does the tax cut really bring more demand?
That is controversial. Economists like Thiess Büttner from the University of Erlangen-Nuremberg assume that a lot is bought firstHowever, consumers only prefer many purchases. For the first quarter of 2021 – when VAT is back to normal – a drop in consumption is expected again.
What does the tax cut cost the state?
The Treasury is assuming that this year around 20 billion euros less tax come in. But that would be a pain if the economy got back on its feet and the citizens were helped at the same time, said Finance Minister Scholz. Because rescue packages for large companies can cost far more. Read here: How families get the children’s bonus of 300 euros.
Is the VAT cut a hidden car purchase premium?
That was suggested by CSU boss Markus Söder at night: Given the reduction in VAT, it was bearable that there would be no car purchase premium for combustion engines. The car manufacturers immediately assured that they wanted to pass on the full price advantage to their customers. But the impact will be far from what most manufacturers hoped for in a premium for most cars. Even a car for 30,000 euros would only be around 650 euros cheaper. It is uncertain whether this will motivate consumers to buy, who do not actually need a new car.
Can the reduction be decided by July 1st?
At least it will be sporty. The Bundestag meets again beforehand, then a law could be passed in an urgent procedure. The Federal Council, on the other hand, would have to meet in a special session to wave the tax cut in time.
What does the tax cut mean for gastronomy?
Thanks to the new stimulus package, overnight stays and deliveries outside the home are now taxed at 5 instead of 7 percent. As a corona compensation, the sales tax rate for food in the restaurant drops from 19 to 7 percent, but not for drinks. They are taxed at 16 percent.
The website of the federal government states: “The value added tax rate for meals in restaurants is reduced from 19 to 7 percent. This is intended to support the catering industry during the reopening period and to alleviate the economic effects of the corona restrictions. The regulation applies from July 1, 2020 and is limited to June 30, 2021. ”
VAT equal to VAT?
There is no relevant difference between VAT and VAT for entrepreneurs. At least in Germany, sales tax and VAT always mean the same type of tax. From a German perspective, the term “sales tax” is correct, because there is a “sales tax law” (UStG), but no “sales tax law”. Colloquially, however, the term VAT is used more often.
(jb / dpa / afp)
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