Return to 19% VAT: What does that mean for the catering industry? Financial experts provide insights and forecasts.

Return to 19% VAT: What does that mean for the catering industry? Financial experts provide insights and forecasts.

According to a report from www.deutschlandfunk.de,

The catering industry is facing a new challenge, as the VAT for food and drinks will be increased again to 19 percent. The temporary reduction to seven percent during the COVID-19 pandemic is now to be reversed. Experts are divided on the impact of this decision.

Marcel Fratzscher, President of the German Institute for Economic Research (DIW), no longer sees any reason to subsidize the industry and emphasizes the financial impact on other areas of society. Friedrich Heinemann and Oliver Holtemöller, economists, also support the abolition of the benefit and point out socio-political problems.

The return to the higher VAT rate is already having an impact on prices in the catering industry. The Federal Statistical Office shows that the cost of eating out in restaurants has increased by an average of 20 percent, partly due to an anticipated price increase.

The German Hotel and Restaurant Association (Dehoga) fears that the costs will be passed on to customers and thus lead to a decline in restaurant visits. In fact, 44 percent of those surveyed plan to eat out less often if VAT is fully increased again. This could particularly affect cheaper restaurants in less affluent neighborhoods or in rural areas.

Furthermore, it is emphasized that the catering industry is at a disadvantage compared to delivery services and fast food restaurants, as they only have to pay the lower VAT rate, which leads to competitive disadvantages.

In particular, the financial service provider Crif predicts that the catering industry will record an increasing number of bankruptcies, which could particularly occur in some federal states such as Berlin, Bremen and Hamburg.

Overall, there are structural problems in the catering industry, such as the loss of staff and training breaks, which threaten the industry in the long term. The effects of the VAT increase will continue to pose major challenges for the catering industry.