“The Government Finally Sets Financial Policy Priorities”

The ruling of the Federal Constitutional Court has prompted the government to take action. According to media reports, the traffic light coalition has now decided not to extend the temporary reduction of the value-added tax for hospitality sector from 19 to 7 per cent. Friedrich Heinemann, head of the Research Unit “Corporate Taxation and Public Finance” at ZEW Mannheim and professor at Heidelberg University, has commented on this matter:

“The government coalition deserves praise for finally starting to set financial policy priorities. Through its ruling, the Federal Constitutional Court has now given the government a decisive impetus in dealing with the respective interest groups. The gastronomy lobby and wholesale traders ran a vigorous and influential campaign, but their arguments were feeble and inconsistent. The tax subsidy for restaurants is socially problematic because it primarily benefits the wealthy. It cannot stop the structural change in the hospitality sector, and it is very costly. Additionally, the initial justification for the VAT reduction, the pandemic, has long been obsolete. Industry representatives have painted an overly bleak picture of a return to normal taxation. Now, over three billion euros per year will be freed up for truly important future-oriented projects. Those who have doubted the sense of the debt brake will now be taught otherwise. This debt rule is an invaluable instrument for rational and goal-oriented budget policy.”