German government announces reduced VAT

To jump-start its economy the German government has decided to reduce its Value-Added Tax rate.

As of 1st July up until 31st December VAT will be lowered from 19% to 16% and the anyhow "reduced VAT rate" will drop by 2 percentage points to 5%. Latter VAT is applied to goods like food and specific drinks, books and papers, art and certain services.

Whether or not this approach will show an overall positive affect we will let leading economists fight out; looking at an average German private household though, savings in the second half of 2020 are estimated to total at approx. 180€ and only if retailers do not increase their prices!
Increasing prices for goods and services is however something consumers are already experiencing, so one could get the impression this measure is really to cover up the already creeping inflation, that without doubt people are going to feel the effects of in due course.

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