VAT will be increased again at the beginning of 2021. There is no need in either the Ministry of Finance or the Ministry of Economics to extend the VAT reduction.
On July 1, the federal government had reduced the value added tax from 19 to 16 percent and 7 to 5 percent. The aim was to achieve a short-term boost in demand for the economy in the Corona crisis, as many companies passed the price advantage on to consumers.
However, experts had already warned in advance that experience has shown that the effect on companies is small. In return, the reduction for the state budget is an expensive matter. A total of 20 billion euros less tax money was calculated for the six months.
Indeed, the lowering appears to have little effect. The reason: During the crisis, Germans preferred to save instead of buying expensive. In the last six months, the savings rate among Germans has doubled. “So far, the effects of the VAT reduction have been less pronounced,” said GfK consumer expert Rolf Bürkl to “Handelsblatt” at the end of October.
You see it that way in the Ministry of Economic Affairs, too. With the exception of a few associations who are even cautious about extending the reduction, this is currently not a popular demand.