- Germany’s coalition government is actively discussing raising the standard VAT rate from 19% to 21% or 22% to fund income tax and social security contribution cuts.
- The VAT hike could generate around €31 billion, enabling income tax cuts and annual savings of €300–€400 for average workers.
- To offset the regressive impact, the reduced VAT rate may be cut from 7% to 4%, with a 0% rate on essential groceries.
- The reform aims to shift the tax burden from income to consumption, repeating a similar 2007 policy.
- The proposal is politically sensitive due to inflation and rising consumer prices, with debates over ensuring relief for lower-income households.
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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