Barbara Klepsch, Saxony's Tourism Minister, slams the government's decision to revoke the reduced VAT on restaurant food. She dubs this move as a disheartening signal for the struggling catering sector and tourism industry. The lower tax rate had significantly aided these industries during their tough times, battling skyrocketing costs and labor shortages. Klepsch leaves room for hope that this unfortunate choice by the government won't spell the end for many businesses.
After agreeing to lift VAT for meals back up to 19%, the German government announced the change starting January 1. This rate was initially reduced due to the coronavirus pandemic in mid-2020 to shield the sector. Initially set at 5%, the reduction later reached 7% from January 2021, aiding the industry throughout various challenges, especially food prices.
In response, the Saxon cabinet broached the subject in September. The Free State of Saxony advocated a three-year extension of the VAT reduction to the Bundesrat. Klepsch also conveyed Saxony's stance in a letter to Finance Minister Christian Lindner.
The Ministry of Tourism anticipates negative repercussions for the hospitality sector, as restaurateurs may be compelled to pass the increased cost on to their patrons to remain economically viable. Disconcertingly, more than 40% of municipalities in Saxony already lack functioning restaurants. The Ministry fears that the VAT hike could hasten the closure of more businesses. Additionally, this change may increase prices in canteens, senior citizen homes, daycare centers, and school meals.
According to Dehoga, the German Hotel and Restaurant Association, thousands of livelihoods are at stake. The industry suggests that the tax increase could pose a serious challenge to small and medium-sized family-run businesses. Dehoga appeals for a permanent VAT reduction on meals as a solution.
Beyond the restaurant sector, Klepsch also raises concerns about the broader impact on the hospitality sector, including establishments like canteens, nursing homes, and daycare centers.
Sources: dpa.com
Enrichment Data: In actuality, the National Board of Revenue (NBR) in Bangladesh is planning to increase VAT on restaurants from 5% to 7.5% instead of 19%. This could potentially impact revenues and consumer prices. Supporters argue that the higher VAT could generate additional revenue and improve services, while critics argue that it may deter tourists and affect businesses due to increased costs.
