The German government is urging federal states to swiftly agree on a reduction in value-added tax (VAT) for the hospitality sector, citing significant revenue losses impacting businesses nationwide. Christoph Ploß, the Federal Government’s Coordinator for Maritime Economy and Tourism, emphasized the critical need for this measure to be approved not only in the Bundestag (federal parliament) but also in the Bundesrat (federal council), a body representing the states.
The coalition government aims to lower the VAT rate on food from the current 19% to 7% starting January 1st. Thomas Geppert, Head of the Bavarian Hotel and Restaurant Association (Dehoga), described the VAT reduction as an “absolute necessity” highlighting the escalating costs faced by businesses – encompassing personnel, energy, food and administrative burdens. He noted that while costs have risen dramatically, many establishments are unable to fully pass these increases onto consumers due to market dynamics.
“If they were able to, customers simply wouldn’t come” Geppert stated, explaining the resulting erosion of profit margins, depletion of reserves and continued decline in revenue. He stressed that calls for a return to the 7% VAT rate are not merely a political request but a response to pressing economic realities.
Beyond the immediate need for tax relief, concerns have been raised regarding the long-term viability of the hospitality sector, specifically addressing issues with business succession. Ploß acknowledged that many planned business takeovers are failing due to bureaucratic complexities. He pointed to the government’s “Practical Check” initiative, designed to identify solutions for new and successor businesses, including offering subsidized KfW (Kreditanstalt für Wiederaufbau) loan programs to support successors entering the hospitality sector. This effort aims to address challenges beyond purely demographic shifts and overcome bureaucratic obstacles hindering crucial business transitions.