“The low tax doesn’t do anything”

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From now on, a reduced VAT rate applies in Germany. But do people buy more because of this? How do you cope with the new prices? t-online.de asked.

Berlin, Alexanderplatz on the first day of the new VAT period: An elderly lady strolls under the television tower, holding a shopping bag in her hand. “That is far too little,” she says, introducing herself to the reporter as Gisela and pointing to the bag. “The low tax doesn’t do anything.”

Among other things, she bought a phone – from Saturn. The pensioner pulls the shopping list out of her pocket. The device cost 38.98 euros. Your savings: one euro. “But that’s not why I bought it – I just needed it,” she says. “In order to go to a shop extra, the drop would have to be clearer.”

The pensioner Gisela bought a phone - and saved one euro.  (Source: t-online.de/privat)The pensioner Gisela bought a phone – and saved one euro. (Source: privat / t-online.de)

That doesn’t sound like the buzz Olaf Scholz wanted to conjure up with the reduction in VAT. As of July, the value added tax that everyone has to pay when shopping is 16 percent instead of 19 percent. The reduced rate – for example for food – has also dropped from seven to five percent. With this measure, the federal government wants to boost the economy – motivate people to shop and spend money.

But whether that works is questionable. Because like Gisela, there are many people who are in stores today. The two friends Pina and Carlotta did not notice the lower prices either, they say. “You practically don’t notice that.” And that’s why they weren’t shopping at all.

Carlotta and Pina (from left): “You practically don’t notice that.” (Source: privat / t-online.de)

The 69-year-old Inge Geiger was not shopping because of the VAT reduction. “It was just right in time,” she says. When she was shopping, she would not have noticed the reduction – unless the people at the checkout had pointed it out. “Now you’ve saved something,” Geiger quotes the cashier.

Value added tax cut increases economic output by 0.2 percent

She also says: “You can only notice the reduction in VAT if you sit down at home after shopping and calculate the savings.” She still had the receipts, it wouldn’t fail because of that. “But who has the time?”

The impressions from the capital are hardly representative. But they do give a first impression: The tax cut – at least for everyday purchases – will hardly be a major stimulus for consumption and thus drive the economy.

This fits in with what the economists at the Ifo Institute have recently calculated in a corresponding forecast: the reduction in VAT increases economic output by only 0.2 percent. In contrast, the federal government has to forego tax revenues of 20 billion euros.

Nevertheless, there are also situations in which people are happy about the low tax. “I noticed it at Netflix,” says 22-year-old Pierre. “They sent an email.”

Customers should be vigilant on Amazon

The fact is: the VAT rate also drops in online shops and online services. However, customers should be even more attentive – for example at Amazon. A company spokesman emphasizes: “We aim to pass on the entire sales tax reduction to customers. With Amazon’s own offers, customers will benefit from savings for millions of products.”

At the same time, however, he points out that the sellers decide individually whether and how they pass on the discount. So it may happen that prices are shown “including temporarily reduced” VAT – but the price has not been reduced at all.

Douglas passes on low tax in the form of vouchers

Many traders will not pass on the tax savings directly to customers. The perfumery chain Douglas, for example, has incurred resentment from many customers because it is issuing a voucher for the next purchase instead of lower prices – in the amount of the discount.

On Twitter, the announcement by Douglas boss Tina Müller caused a downright shit storm. “Absolute cheek that will damage the Douglas brand in the long term,” comments one user.

Others seem annoyed. “It’s too complicated for me,” writes one user. “I’ll be back in January.”

VAT reduction ensures price confusion warr

Many consumers also feel overwhelmed. Because even if the prices are adjusted, it can be complicated for customers – and cause strange blooms. At the discounter or supermarket there is a veritable confusion of prices.

“Nobody can see through here,” grumbles a woman standing in front of the yogurt shelf near Kaufland in Berlin.

The yellow sign says “Discount Billig”. But what exactly does that mean? (Source: privat / t-online.de)

At the supermarket, the prices on every shelf were changed – “0.71” is crossed out for a liter of milk on a yellow sign – and next to it in large: “0.69” and “Discount Billig”. A bag of Haribo gold bears currently costs 0.59 euros at Kaufland - the red sign indicates this.  (Source: t-online.de/privat)A bag of Haribo gold bears currently costs 0.59 euros at Kaufland – the red sign indicates this. (Source: privat / t-online.de)

Other price labels are red – these are products from advertising. For example, a bag of Haribo gold bears costs 59 cents instead of 99 cents – you can now save 40 percent. But whether that comes from the lower VAT is not clear.The white price tags show how expensive the tea is: 1.75 euros.  (Source: t-online.de/privat)The white price tags show how expensive the tea is: 1.75 euros. (Source: privat / t-online.de)

Hartmut Schmidt is also unsure. “I pay close attention to prices,” he says. He goes shopping every day – mostly just little things. “I can tell when all prices suddenly drop,” says the 86-year-old. Even if it’s just cents.

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