Germany’s Restaurant VAT Cut Fails to Lower Prices

• Germany permanently cut VAT on restaurant and catering food from 19% to 7% effective 1 January 2026; drinks remain taxed at 19%.
• A study of over 180,000 dishes at more than 12,000 restaurants found 91% of menu prices unchanged after the cut, about 8% higher, and only around 1% lower.
• Average restaurant prices rose by 0.5%, indicating most businesses retained the VAT savings rather than passing them on to consumers.
• NGG estimates that full pass-through of the VAT reduction could have lowered consumer prices by roughly 10%.
• The evidence suggests reduced VAT rates do not automatically translate into lower consumer prices; the benefit may instead flow to business margins, wages, or investment.

Source: vatcalc.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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