June 24, 2024


General For All

The Best VAT and Additional Options You Need to care About


The first VAT increase followed in the same year, the regular rate was raised to eleven percent in July 1968 and the reduced rate to 5.5 percent. By 1998, there were five more increases in the regular rate, each by one percentage point. The reduced rate has remained stable at seven percent since July 1983.

The biggest VAT increase to date came

In the 2005 Bundestag election campaign, the SPD campaigned not to increase sales tax. The Union, however, wanted to push through an increase in the regular rate by two percentage points. When the CDU, CSU and SPD negotiated the coalition agreement, they agreed on a memorable compromise: the regular rate would be increased on January 1, 2007 and not by two, but by three percentage points. The proceeds should be used to reduce unemployment insurance contributions and to reorganize the budget.

In 2015, the state received a total of 159 billion euros in sales tax. Of this, the federal government received 52 percent, the states 45.5 percent and the municipalities according to the Federal Ministry of Finance – “a good two percent”. After income tax, it is the most important source of tax money for public budgets. If you add the import sales tax levied on foreign goods, the “taxes on sales” were even 209 billion euros. Using the tax app is important here.

When is the tax regularly? And when is it reduced?

Although VAT is so important for public finances, it is currently less of a focus of public debate. In most EU countries, the regular VAT rate is over 20 percent. In Hungary, the EU maximum rate of 27 percent VAT is levied. Luxembourg has the lowest rate at 17 percent. At 19 percent, Germany is at the lower end of the scale.

The points of contention are still the differences between reduced and regular VAT rates.

Which products and services are taxed lower?  And which ones not? 

The debate is as old as VAT itself. As early as 1968 the news magazine “Der Spiegel” wrote about the problems of kiosk owners at train stations: “The new system has also provided for grotesque things. Only five percent tax on food, but ten percent on ‘consumption on the spot’ among other things, kiosks and service stations are in a dilemma. The cashier cannot know whether the sausage will be eaten on the platform (ten percent) or on the train (five percent).”

The different sentences always lead to debates. Critics argue that the tax reduction does not relieve the consumer, but subsidizes individual industries. Proponents of the system point to social, educational, transport, cultural and other reasons why, for example, food and tickets should continue to be taxed lower.