Muted buying mood due to Corona: lowering VAT has hardly any effect

So far, the VAT cut has not had much of an effect. Because of the pandemic, many customers avoid shopping in stores. In return, online retail benefits even more. A very special industry.

According to the Nürnberger Gesellschaft für Konsumforschung (GfK), the lower value added tax due to the corona crisis has so far hardly given any economic impetus. "So far, the effects of the VAT reduction have been less pronounced," said GfK consumer expert Rolf Bürkl to "Handelsblatt". He added: "Based on our experience with the increase in 2007, however, we are assuming that there will be positive effects especially towards the end of the year."

From Bürkl's point of view, the subdued buying mood of Germans primarily affects stationary retail, because consumers are unsettled due to the increasing number of infections and many tend to avoid going to shops. In addition, "shopping with a mask is only limited fun". The expert is correspondingly skeptical about a possible extension of the temporary tax cut. "As long as consumers are insecure and are afraid to go into stores, an extension of the VAT reduction will not benefit stationary retail as much as online purchases."

Online retail in particular should also benefit more from the corona restrictions, said Bürkl. In general, the expert attaches little importance to consumption as a pillar of the economy in the Corona crisis. With the increase in infection rates, the consumer climate has recently weakened again somewhat. "As a result, overall consumption is currently not a major pillar of the German economy," said Bürkl.

However, the researcher sees the food retail trade as the beneficiary. Here the growth compared to the previous year is positive. "This also has to do with the fact that, with the lockdown, home office and short-time work, the lives of many employees have shifted to their own four walls," explained Bürkl. The consumption of food and drinks has shifted from outside the home in restaurants, canteens or snack bars to "inhome". "The food retail trade has benefited from this," said Bürkl. Accordingly, sales for out-of-home consumption have collapsed.

Lower tax rates have been in effect for six months since July: 16 instead of 19 percent and 5 instead of 7 percent. The federal government wants to boost consumption in the corona crisis. Federal Finance Minister Olaf Scholz has reaffirmed his position to really let the temporary VAT reduction expire at the end of the year. "It is precisely because this tax cut and the temporary introduction of the declining balance depreciation have been limited in time that they are having an effect. Consumers and companies should not all wait for better times. That is the whole secret of success," said the Vice Chancellor of the Frankfurter Allgemeine Zeitung ". "Ms. Merkel and I agree that the VAT reduction will expire at the end of the year."