Will the catering industry be burdened by a VAT increase from 2024? Financial experts express concerns.

Will the catering industry be burdened by a VAT increase from 2024? Financial experts express concerns.

According to a report by web.de, VAT in the catering industry is expected to rise from seven to 19 percent at the beginning of 2024. The Dehoga hotel and restaurant association fears that many restaurants and cafés could go bankrupt as a result. The association argues that the reduced VAT is important for the diversity of the restaurant landscape and that an increase in the tax would have a negative impact on inner cities and restaurants in rural areas. In addition, restaurateurs would have to pass on the increase in VAT directly to customers, which would lead to considerable financial burdens for certain customer groups. According to the association, there is also a lack of tax equity as prepared food at restaurants would be taxed at 19 percent, while takeaway food would still be taxed at seven percent.

Consumer advocate Frank Waskow from the North Rhine-Westphalia Consumer Center is critical of maintaining the lower VAT. He argues that the catering industry was already supported with corona aid during the pandemic. In addition, if the VAT is not increased, the state would lose more than three billion euros in revenue per year. Waskow also questions the future viability of companies that are allegedly no longer profitable due to the repatriation of VAT.

The Munich economist Florian Neumeier from the Ifo Institute is critical of the hotel and restaurant association's argument that the lower VAT means that low-income people can go to restaurants and cafés more often. He notes that catering services are more likely to be in demand by households with higher incomes and that a reduction in VAT therefore primarily benefits high-income households. Neumeier is of the opinion that a targeted aid measure for catering establishments is not justified.

It is expected that an increase in VAT in the catering industry would result in many restaurants and cafés experiencing economic difficulties and possibly having to close. Customers would have to pay higher prices for their restaurant visits, which would potentially discourage certain groups of customers from continuing to eat in restaurants. There would also be a risk of inequality in the taxation of prepared food in restaurants compared to takeaway food. It remains to be seen whether politicians will take measures to mitigate the impact of the VAT increase on the catering industry.

Source: According to a report from web.de, https://web.de/magazine/wirtschaft/mehrwertsteuer-19-prozent-verkraftet-gastronomie-38795986