Thursday, January 5, 2017

This VAT Discussion

One of the things that a non-German starts to notice immediately upon arrival in the taxation situation.  So the Value-added Tax (VAT) becomes one of these nice things to know about.

Normal VAT rates are 19-percent.  Yeah, it is kinda shocking.  But if you look at neighbors of Hungary (27-percent VAT), Sweden (25-percent VAT), and Belgium (21-percent VAT)....then this 19-percent rate isn't that bad.  I might take two or three beers to convince a non-German of that.

As you waltz into the VAT discussion, then you start to discover that common and daily food, newspapers, flowers, train-tickets....are limited to 7-percent.

Bottled water?  7-percent.  Drugs?  19-percent (luxury item). Movie ticket?  7-percent.  Renovation to your house?  19-percent.  Restaurant excursions?  19-percent. Bikes? 19-percent.  Haircuts? 19-percent.  All beer, wine and hard alcohol?  19-percent.  Firewood?  7-percent.  Oil heat?  19-percent.  Kid's car seats? 19-percent.  Amusement park tickets? 19-percent. Opera or jazz concert? 7-percent. Milk? 7-percent.  Brats?  7-percent.

Curious about European rates?  There is a good table at a EU site listed.

I bring all of this up because there is a story in today's German news of the idea of raising the food item tax on anything related to meat (including milk and cheese) from 7-percent to 19-percent.  It's an odd discussion.

It's the German environmental agency (the Umweltbundsamt) that brought this up....NOT the Bundestag.

What they are suggesting is that meat production in Germany (doesn't matter if you talk chicken, pork, meat, turkey, etc) is harming the German environment. So they want the cheaper 7-percent rate dumped on these products.

I brought this up with the German wife, who makes all the purchases.  She is a big milk and cheese person, and she amounted our yearly purchase total of meat, dairy, around 750 Euro a year....more or less.  Throwing another 12-percent on our year bill....roughly 85 Euro.

The sad thing is that for most wouldn't matter, they'd just keep buying the same amount and deduct the 85 Euro from their yearly pocket money.  For those on welfare or at the bottom of the salary structure....85 Euro would not be easily found.

The slanted angle to this deal?  The Umweltbundsamt suggests that the VAT for fruit and vegetables might be reduced....never saying what exactly.  Currently at 7-percent....since they are suggesting to hype the other VAT to'd think that fruit and vegetables would go to zero-percent....using their logic.  Course, that will never happen.

 The odds of this whole VAT change to occur?  Well....first, this didn't come up in the Bundestag or with any political party....just with one government agency.  Second, you can imagine the political discussion here, and the likely nature that neither the CDU or SPD would like this idea to get the public all hyped up.  Neither party would want to appear as the anti-beef or anti-cheese party.

But this drives you to ponder this odd aspect....would this really change anyone's behavior?

In the cases of Nordic countries where hard alcohol was extremely heavily taxed....yes, it changes your behavior, and it's mostly a proven situation.

In the case of German taxation on cigarettes which went to a hefty amount of taxation...the amount of collected tax revenue on smokes would suggest that Germans lessened their smoking habits.  What the Zollamt folks will say is that a massive amount of black-market importing of cigarettes has occurred in the level of several hundred million Euro of tax revenue is now lost as people sneak in thousands of cartons of non-taxed smokes every week.

Would Germans go and drive into neighboring countries to buy beef, cheese, or milk? I would imagine that would occur, IF this VAT were implemented.  The odds of passing in 2017?  Zero chance....with the election in full swing.  With the exception of the Green Party, I don't think any of the political parties want to identify themselves as anti-meat or anti-milk.  This only serves to make public debate.

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