The German federal government is reportedly working internally on a two‑percentage‑point increase in the standard value‑added tax (VAT) from 19 % to 21 %, according to “Handelsblatt” citing several senior government officials and coalition politicians. The hike would be part of a broader package that would include reductions in income tax or social contributions.
In the Finance Ministry, various scenarios have been calculated. The Social Democrats see a two‑point rise as a way to finance a tax cut for small‑ and medium‑income households. Union representatives also consider it if significant cuts to social contributions accompany it. To cushion the impact on low‑income earners, there is talk of reducing the reduced VAT rate-from the current 7 % to perhaps 4 %-and even discussing a zero‑percent rate on food items. No final decision has been made yet.
Within the black‑red coalition (SPD, Greens, Left), there are sharp critics of any increase. They argue that such a measure would be politically difficult to justify and point to the Iran war and rising energy prices. If energy costs keep climbing, raising the general VAT rate would be hard because citizens would already be burdened by higher prices.
Today, the regular VAT rate stands at 19 %. An additional one‑percentage‑point increase would bring in over 15 billion euros in extra revenue, while a two‑percentage‑point rise would generate about 31 billion euros. The reduced rate of 7 % applies to everyday necessities such as food, books, certain cultural and sporting events, and public transportation.