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Consumer advocates: Lowering VAT has little effect

Consumer advocates think little of extending the VAT cut that will expire at the end of the year. The measure to support the economy in the corona crisis did not work as hoped, said the head of the Federal Association of Consumer Organizations, Klaus Müller, the dpa news agency. With a view to the 20 billion euros that the federal government paid for the reduction, “there is no good relationship between expenditure and income,” said Müller.

It is true that the tax cut in the food trade, for example, was passed on fairly and appropriately to consumers. In the catering and hotel industry, however, this practically never happened at all. There is light and shadow in online trading. For example, some dealers first increased the prices in order to then lower them again with the new tax rate.

The federal government had decided to reduce the VAT rate from July 1 to December 31 from 19 to 16 percent. The reduced rate that applies to many groceries and everyday goods has been reduced from seven to five percent. That should boost the economy and motivate citizens to bring expensive purchases forward a few months despite the crisis.

This pull-forward effect no longer works if the action is continued, said Müller. “I think there are two levers that have proven to be effective and much cheaper to implement.” The second lever is the electricity price. If it sinks, everyone receives the money. According to studies, low-income households in particular benefited. Müller demanded that politics should “not only think about the economy, please also think about consumers”.

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