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VAT reduction: stimulus package: what the reduction in VAT really brings you | message


What is to be achieved by the lowering

The corona crisis has hit many industries hard. The federal government now hopes to accelerate the recovery of the ailing economy by lowering the VAT rate from 19 to 16 percent for half a year. Food should also no longer be taxed at seven percent during this time, but at five percent. This step is based on the basic idea that retailers, service providers and producers pass the reductions on to consumers. This is intended to create incentives to buy more consumer goods or to use more services and thus to stimulate the economy.

The implementation of the stimulus package

There are a number of challenges in implementing the economic stimulus package, because traders can only be asked to do so and not forced to really pass the tax cut on to their customers. The President of the Kiel Institute for the World Economy, Gabriel Felbermayr, told the “Handelsblatt”: “It is not entirely clear to me whether the companies will really cut their prices for the short term or not simply take this tax cut with them.” He also refers to the costs of reprinting the price tags, the change in the checkout systems and the additional effort for advertising that retailers will face. However, the food discounter ALDI and Deutsche Bahn have already made a positive statement, with both groups announcing that they will pass the price cuts on to their customers.

How much you can save in everyday life

If one assumes a weekly grocery shopping that amounts to 100 euros, the consumer can save 1.87 euros from July 1st. That sounds very little at first. However, if a purchase value of EUR 100 is due weekly, around EUR 50 can be saved by the end of the year.

The reduction in VAT only becomes more noticeable with larger expenditure. For example, the purchase of a vehicle that costs € 30,000 with the usual taxation would be available temporarily after July 1 for € 29,243.69. A saving of 756.31 euros.

The stimulus package could also be worth buying furniture. With a new kitchen for 5,000 euros, you would pay 4,873.95 euros with the new VAT rate – a saving of 126.05 euros.

Editorial office

Image sources: Gunnar Pippel /

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