The VAT in Germany will be reduced on 1 July. It is part of a great financial aid package.
The large financial aid package adopted in Germany last night contains a reduction in VAT, which differs according to whether food or other goods.
From July 1, it could mean cheaper beer, sodas, sweets and so on food in the shops south of the Danish border, which thousands of Danes pilgrimage to shop.
The VAT on foodis reduced from seven to five percent, while for other goods it falls to 16 percent from 19 percent and the reduction applies for the rest of the year. In Denmark, VAT is 25 percent.
Merchants fear increased border trade
Some of the German border shops have been closed since mid-March, when the Danish authorities decided to advise against all unnecessary journeys out of Denmark.
Border stores such as Fleggaard, Calle and Poetzsch will open again on June 15.
Here, the Ministry of Foreign Affairs travel guide to Germany is changed, so that no longer discourages to travel south as long as you avoid the largest cities with over 750,000 inhabitants.
At the Co-operative Traders, it is feared that a larger proportion of Danes’ consumption will move out of the country when the VAT is reduced. That’s what CEO John Wagner says.
– We fear one explosionin the border trade, when the borders open again, and this will be detrimental to the retail life and employment in Danish stores. VAT is already significantly lower in Germany, and we believe it has a major psychological effect that it will be lowered further, he says.
In the Folketing, the Left recently proposed halving the VAT as part of a financial aid package.
The Economic Council – known as the Sages – recently said that lower VAT was not at the top of their list then effect is uncertain.
The argument is that one cannot be sure that stores will lower prices accordingly and whether lower prices will lead to higher consumption, or whether consumers instead, save more.
V disagrees with the sages
At Venstre, finance spokesman Troels Lund Poulsen believes that Denmark should follow the German example. He does not share the sages’ judgment.
– It is clear to us that lowering the VAT will have a positive effect because it will only be triggered if people actually spend the money.
– I am sure that business will lower prices accordingly if VAT is reduced. Failure to do so will result in severe punishmentconsumers, he says.
As part of the aid package, the German government has also reduced the VAT on restaurant visits. It has been cut to 7 percent from 19 percent.