VAT on gastronomy: Experts see social and economic effects from 2024.

VAT on gastronomy: Experts see social and economic effects from 2024.

According to a report by www.t-online.de,

The planned increase in VAT on food from January 1, 2024 is causing discussions in the catering industry. Although restaurants, bars and hotels are seeing sales growth, the impending return to the old 19 percent VAT increase raises questions about the impact on prices and the profitability of businesses.

The German Hotel and Restaurant Association (Dehoga) classifies the tax increase to the standard rate of 19 percent as a “catastrophe for companies”. It is feared that this could lead to a price shock for guests and would mean the end of many businesses. The reduction in VAT on food to 7 percent meant financial relief for the industry, but the upcoming adjustment could lead to noticeable price increases.

Increased personnel costs, inflation, higher energy and purchasing prices also contribute to the price increases. The cost of goods for a classic schnitzel dish has increased by 33 percent, which puts pressure on the companies' overall costs.

However, some economists welcome the increase in VAT because they see the current relief as socially problematic and the subsidies as unfair to the wealthy. However, the discussion about which sectors could have long-term difficulties and could only survive with subsidies highlights concerns about the economic viability of the catering industry.

The effects of the VAT adjustment on the prices in the menu are clear: a schnitzel with fries could rise from the current 18 euros to 20 euros, and other dishes would become correspondingly more expensive. This could lead to a shift in profit margins and an adjustment of business models in the catering industry.

The coming year will show whether the death of village inns will accelerate and how guests' eating habits will change. Despite the challenges, however, there are reasons for optimism, such as the improving financial situation of many consumers and falling inflation.

Overall, the upcoming VAT increase and the associated price increases in the catering industry represent a challenge that could require an adjustment of cost structures and business models.