VAT reduction by 2021
Probably the most important measure in the Corona economic stimulus package is the reduction in VAT from 19 to 16 percent or from 7 to 5 percent from July 1 to December 31, 2020. That goes for everything – from Balenciaga sneakers to Everyday goods such as milk or pasta, handicrafts or in the catering trade. That costs the federal government around 20 billion euros. The only question is: will the reduction in VAT be passed on to consumers? The state cannot force retailers to do this.
However, the first major supermarket chains such as Rewe and Edeka have announced that they will pass the price reduction on to customers – and discounters such as Lidl and Aldi are also following suit. How it looks at fashion or furniture retailers is still unclear. Because they also suffered much more from the lockdown than the food and drugstore.
Note: Most restaurants and bars are unlikely to pass the reduction in VAT on to their guests – and honestly: after almost three months of forced closure, you can hardly blame them.