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Ifo: Economists and consumer advocates call for an end to the VAT cut

2020-10-28T07:02:49.607Z


"Fiscally expensive and not precisely targeted": Ifo boss Clemens Fuest sees the VAT cut as critical, according to a "Handelsblatt" report. Consumer advocates also speak out against the measure.


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Signs with the inscription "16% VAT free on all articles" are intended to encourage buying (archive image)

Photo: Christian Charisius / dpa

Economists and consumer advocates have opposed extending the reduction in VAT beyond the end of the year.

"The VAT reduction should expire towards the end of the year. It is fiscally expensive and not targeted," said the President of the Munich Ifo Institute, Clemens Fuest, the "Handelsblatt".

"It helps most of the industries with high sales, ie the winners of the crisis."

Director of the Institute for Economic Research (Ifo) Clemens Fuest

Photo: Soeren Stache / picture alliance / dpa

In addition, it is not necessary to stimulate general consumption by the state.

"Private households saved a lot of money in the pandemic, but they cannot and should not spend it on 'social' consumption that is at risk of contagion," said Fuest.

And other consumer spending is high enough.

"Costs and income are disproportionate"

Germany’s top consumer advocate Klaus Müller is also calling for an end to the VAT reduction.

"The past few months have failed to prove that the sales tax cut is having as positive an impact on the economy as we had hoped. Costs and earnings are disproportionate," said the head of the Federation of German Consumer Organizations (VZBV).

"The federal government should therefore return to the regular rates after the end of the year and launch more effective projects to relieve consumers during the crisis."

In Müller's opinion, a suitable means would be a reduction in electricity costs or a higher child bonus.

The VZBV boss is also skeptical of the demand for early Christmas bonus payments: he doubts "that stationary retail would benefit more from such a measure than online retail, which is already vying for early Christmas shopping with extended return periods," said Müller.

Nevertheless, he is happy for every consumer who has more money in his pocket earlier thanks to an early Christmas bonus.

The decision on this lies with the social partners.

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Source: spiegel

All business articles on 2020-10-28

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