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Consumer advocates think little of extending the VAT cut, which will expire at the end of the year. The measure to support the economy in the crown crisis did not work as expected, the head of the Federal Association of Consumer Organizations, Klaus Müller, told the dpa news agency. Faced with the 20,000 million euros that the federal government paid for the reduction, “there is not a good relationship between expenses and income,” Müller said.
It is true that the tax reduction in the food trade, for example, was fairly and adequately passed on to consumers. In the restaurant and hospitality sector, however, this has practically not happened at all. There are lights and shadows in online commerce. For example, some distributors raised prices first and then lowered them again with the new tax rate.
The federal government decided to reduce the VAT rate from July 1 to December 31 from 19 to 16 percent. The reduced rate for many groceries and everyday items has been reduced from seven to five percent. That should boost the economy and motivate citizens to advance expensive purchases for a few months despite the crisis.
This breakthrough effect no longer works if the action is continued, Müller said. “I think there are two levers that have proven to be effective and much cheaper to implement.” On the one hand, families were relieved with the child bonus in a very specific way. The second lever is the price of electricity. If it sinks, everyone gets the money. According to studies, low-income households in particular benefit. Müller demanded that politics “not only think about the economy, but also think about consumers.”
