Ifo Chief Calls for Scrapping Germany's Reduced VAT Rate

Clemens Fuest, president of the Munich-based Ifo Institute, has called for abolishing Germany's reduced value-added tax rate of 7 percent and applying a uniform 19 percent levy on all goods.

In an interview with Bild, Fuest argued that the current system creates complexity and arbitrary treatment, citing examples like restaurants charging 7 percent on food but 19 percent on drinks. To shield low-income households, he proposed annual state credits of 360 euros, noting that households earning above roughly 55,000 euros gross would bear the main burden. After offsetting compensation payments, the reform would generate over 36 billion euros in additional state revenue annually. Fuest emphasized the plan offers a chance to eliminate VAT chaos without overburdening the poorest households.

Source: Der Spiegel