From January 1st, the full VAT rate of 19 percent will apply to food in restaurants. Not all restaurants want to pass this on immediately. At least there is an exception on New Year’s Eve.
Will the schnitzel with fries in the motorway service station cost 16.67 euros instead of 14.99 euros in the future? At least that’s what it would be mathematically like if the VAT rate on food in restaurants increased from 7 percent back to the usual 19 percent at the turn of the year – and innkeepers should charge customers for this in full. Many restaurateurs and restaurant chains are still keeping quiet about announcements. However, the industry association, which vehemently campaigned for a renewed extension of the tax relief introduced temporarily during the Corona crisis, leaves no doubt: the prices for restaurant food will rise.
“If the tax rises from 7 to 19 percent, we will have to increase the prices,” says the general manager of the German Hotel and Restaurant Association (Dehoga), Ingrid Hartges. “There is no leeway for most companies. Hardly anyone can afford to put money into it.” In a survey conducted by your association at the beginning of December, 89 percent of those surveyed said they wanted to raise prices. In the end, Hartges also explains, whether and to what extent the tax increase, which in purely mathematical terms amounts to a good 11.2 percent, has an impact on prices, is up to each innkeeper to decide for themselves.
In order to relieve the burden on the catering industry during the corona pandemic, the tax replacement for food in restaurants and cafés was temporarily reduced from 19 to seven percent – while it remained at 19 percent for drinks. The exemption was then extended several times due to the energy crisis, most recently until the end of 2023. The federal government put the annual costs at 3.4 billion euros. Food taken away, in the supermarket and for delivery is generally taxed at seven percent.
The majority of innkeepers want to increase prices
The steakhouse chain Blockhouse announced that it would not increase prices immediately, but only on January 13th, and then only by seven percentage points. “We are only passing on the increase proportionately,” said a spokeswoman. The pizza chain L’Osteria wants to increase prices in February and then scale them regionally based on purchasing power. Prices are not rising everywhere, said a spokeswoman: “In the more price-sensitive regions, we have decided to only increase prices minimally or not at all, depending on the dish.” All other chains asked by the German Press Agency in mid-December did not yet provide any specific information.
Many are planning fewer visits to restaurants
The industry had long hoped to be able to keep the discount permanently. But after the Federal Constitutional Court’s budget ruling in November, the federal government made it clear: the planned expiry at the end of 2023 remains.
This goes down poorly with the guests. In a representative survey by the opinion research institute YouGov on behalf of the German Press Agency, 69 percent of those surveyed rejected the tax increase. As a result, many people want to go to restaurants less often or spend less there in the future. 44 percent of those surveyed said they wanted to change their behavior when visiting restaurants. A good two-thirds of them want to eat out less often, and a quarter even want to avoid going to restaurants altogether.
Economist: Subsidies for higher earners
While the Federal Association of System Catering speaks of a “worst case scenario” that has now occurred, economists praise the return to the old tax rate. After the end of the pandemic, there is no longer any reason to favor the industry, says Oliver Holtemöller from the Leibniz Institute for Economic Research in Halle. “It’s not the job of politicians to ensure that more people go to restaurants.” Friedrich Heinemann from the Leibniz Center for European Economic Research in Mannheim also sees the discount as a problem in terms of social policy. Higher earners in particular benefit from the tax reduction, he says. “Wealthy people eat out more often and therefore benefit disproportionately. This is counterproductive from a socio-political perspective.”
Unlike the industry association, Heinemann does not believe that the tax will now have a full impact. After all, prices in the catering industry have already risen sharply in recent years and many cost drivers have now been eliminated. The economist believes that this should give the industry some breathing room to at least “somewhat” absorb the tax increase. “That’s why I don’t expect a full price jump now.”
Prices have already risen sharply
According to figures from the Federal Statistical Office, prices for restaurant services rose by 20.3 percent from January 2021 to October 2023, despite the VAT reduction in the meantime. However, Hartges from Dehoga counters, food prices have increased by 29.3 percent in the same period. Hartges is referring to one of several major cost factors in the industry.
“Thanks to the seven percent VAT, we have not yet been forced to pass on all additional costs to the guest.” That will now change. Fewer guests, less sales and operational tasks are programmed. The association fears that 12,000 businesses will go out of business.
At least as a farewell, there is one more exception for the innkeepers: they can still bill the entire New Year’s Eve at the old tax rate, regardless of whether the meal was served before or after midnight. “At least it’s a kind of consolation,” says Björn Cubrowski from the IHK Coburg. After that, the discount ends.
Source: Stern
