Sunday, June 11, 2017

Reduction in VAT?

Today in the German news, there's talk of a reduced VAT (Value-added-tax)....the sales tax of Germany.

Presently, it's 19-percent.  Most European countries charge a minimum of 20-percent.....with Hungary hauling the whooper....27-percent.  The lowest?  Switzerland, at 8-percent.  Germany actually ranks near the bottom of the group.

Up until 2006, it was set in Germany at 16-percent.  Some of the old-timers in Germany will gleefully talk of the period from the late 1960s to late 1970s, when the VAT was 11-percent.  In January of 1993, they crossed the line into the 15-percent level.

So the topic of chat within the government is this 'crazy' idea of reducing the VAT.  No one says the precise amount, or if it would be across the entire board on items.

The magic amount discussed?  14-percent.

If you brought this up in a pub....most Germans would be fairly enthusiastic and hyped-up positive.  On a new car purchase (the high-end type of 28,000 Euro) could be talking about in the range of 1,400 Euro less for the vehicle.

On a 800 Euro big-screen TV?  You could be talking about forty-Euro less.

A big deal?  I think in short-term might have a major plus-up for one brief year.

The reason driving this?  There's been some indicators to say that with a low unemployment rate and people paying income taxes....there's more than enough money in the revenue pot of the government to cover expenses. In the last year....they've even admitted that they've got money left over (always a bad thing for a government to admit this in public).

The odds of a reduction?  You might look at a CDU win in September and think that a new CDU-CSU-FDP government might go this route of reducing the get some big points out of the change, and pump public buying activity for the next year or two.  Long-term staying at 14-percent?  I'd have serious doubts about it staying down at the 14-percent level for more than five years.

In fact, I would even go and suggest that the EU is likely to pass some regulation in the next two years to mandate a minimum of level of VAT (probably 20-percent or higher).

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