Wirtschaftsweiser doubts the effectiveness of the VAT reduction

Shopping shelf in a supermarket, about dts
Shopping shelf in a supermarket, about dts
The head of business practices, Lars Feld, has expressed skepticism about the effectiveness of the VAT cut that will come into force on July 1st.

"In the Council of Experts, we assume that a little more than half of the VAT reduction will be passed on to consumers," Feld told the newspapers of the Funke media group (Tuesday editions). "To this extent there is an early effect in 2020, so that consumption should be correspondingly lower in 2021."

If the VAT reduction is not passed on, it will increase profit margins and have a positive effect on the solvency of the companies concerned. "This also has a stimulating effect on the economy and is perhaps even a bit better in view of the consumer reluctance to buy due to the fear of infection," Feld analyzed. The SPD chairman, Norbert Walter-Borjans, was convinced that the reduction in VAT would "noticeably brighten the consumer climate". Worries that the tax benefit could not be passed on to the customers would evaporate, he predicted. At the same time, Walter-Borjans defended the limitation of the tax cut: "The incentive to consume arises precisely because the tax advantage only waves until the end of the year." The German Chamber of Commerce and Industry (DIHK) warned of a high conversion effort. "The financial administrations and the legislators should be aware of the challenges that companies are currently facing and are particularly reluctant to provide services between companies with complaints," said DIHK tax chief Rainer Kambeck of the Funke newspapers. Within six months, the companies would face two “enormous changeover expenses”.

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