Leading economist Veronika Grimm has sharply criticized recent tax cuts targeting the hospitality sector and increasing commuter benefits, warning that they represent a counterproductive fiscal approach. Speaking to the “Rhinische Post” Grimm, a member of the German government’s Council of Economic Experts, argued that the government should prioritize consolidation and utilize its financial flexibility for future-oriented investments and reforms.
Grimm cautioned against a trajectory mirroring that of France, where expanding deficits to appease specific groups and commuters are eroding available resources. She suggested that this strategy fails to address Germany’s underlying structural challenges and risks strengthening fringe political elements, ultimately hindering necessary reforms. “The government is currently squandering its last chance” she stated.
Reiner Holznagel, president of the German Taxpayers’ Association, echoed Grimm’s concerns regarding the hospitality tax reduction. He pointed out that it singles out a single industry, while neglecting the challenges faced by other sectors such as trades and crafts.
Holznagel also advocated for a comprehensive overhaul of Germany’s complex Value Added Tax (VAT) system. He emphasized the need to streamline bureaucracy and clearly define essential goods and services for which a reduced VAT rate should apply, particularly citing energy and medical products. “It is time for a comprehensive reform of the VAT” he concluded.