German restaurants could lose big as preferential VAT rates expire

12,000 businesses could face failure if the preferential VAT rate is abolished at the end of the year as planned

editor: REMIX NEWS
author: Napi Gazdaság
FILE - In this Saturday, Sept. 21, 2019, file photo, visitors lift glasses of beer during the opening of the 186th Oktoberfest beer festival in Munich, Germany. (AP Photo/Matthias Schrader, file)

The planned withdrawal of reduced VAT at the end of the year is threatening a serious crisis in the German hospitality industry.

The trade association is concerned that 12,000 businesses could go out of business if parliament does not leave the tax relief in place during the epidemic. In Austria, the lobby has already missed the mark, business daily Napi Gazdaság writes.

The VAT on food in the catering sector in Germany was reduced from 19 percent to 7 percent during the recession; this reduction was then extended until the end of 2023 during the energy crisis. The latest concerns from industry players are that 12,000 catering establishments could cease operations if the measure is phased out by the end of the year, because of the existential burden it would place on them.

Ingrid Hartges, CEO of the German Hotel and Restaurant Association (Dehoga), said that in Austria the tax reduction expired at the end of 2021. In Germany, the reduced VAT is still in force this year, currently affecting 186,000 businesses in the hospitality sector, while 36,000 companies already ceased operations during the corona crisis.

Dehoga is now lobbying to extend the reduced VAT period for next year, otherwise the tax increase would have to be passed on in full to customers, as restaurateurs would no longer be able to meet the increased costs.

According to figures from the German Ministry of Finance, the German state is losing around €3.4 billion a year in tax revenue due to the reduced VAT in the hospitality sector. A spokesman for the ministry told the Kleine Zeitung that the VAT cut was only a temporary “crisis prevention measure” and that an extension would have to be decided in a parliamentary procedure; however, this could only be decided later, in light of the November tax estimates.

Such efforts have already failed in Austria, where the sales tax rate for the hospitality and hotel industry, which was temporarily reduced from 10 to 5 percent during the epidemic, was abolished at the end of 2021. At the time, the sector protested vehemently, but despite its insistence that the reduction be extended, it was no longer shown any mercy.

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