Tuesday, January 05, 2021
VAT as an advertising topic
Grocers are reluctant to raise prices
The normal VAT rate has been in effect again since the beginning of the year. This ends the state-initiated discount campaign to stimulate the economy. But some food markets want to stick to the reduced tax rates for the time being.
Many grocers have again identified VAT as an advertising topic. Some market sizes are hesitant to pass the levy, which has been increased again since the beginning of the year, directly on to customers. For example, the discounter Lild announced that in the chain's more than 3200 branches across the country, only the reduced VAT rate of 16 and 5 percent would still be applied. The discount chain Netto, which belongs to the Edeka Group, had previously announced the same. The supermarket chain Rewe had already announced before the turn of the year that the return to the regular tax rates of 19 and 7 percent would be implemented "in the first days of January" in view of the thousands of labels to be redesigned per store.
The fact that VAT is an issue with which retailers like to make a name for themselves was already evident when it was cut last summer. At that time, Lidl did not wait for the deadline, but lowered prices more than a week in advance. Rival Aldi countered and increased the VAT cut at a price reduction of three percent on the entire range. The additional discount cost the discounter a three-digit million amount.
Klöckner warns: Not at the farmers' expense
The federal government had reduced VAT in the summer to stimulate consumption and revitalize retail in the midst of the Corona crisis. The opinions of economists and business representatives differ on the success of the campaign. The campaign was limited from the beginning to January 31.
Meanwhile, Federal Agriculture Minister Julia Klöckner warned traders not to carry out the current price campaigns at the farmers' expense. "The fact that the three percent VAT is not passed back directly to the consumer must not be done at the expense of the agricultural producers and their margins!" She demanded.
However, the industry journal "Lebensmittel Zeitung" sees signs that "in the coming weeks, prices will be increased everywhere due to the increased VAT". Aldi Süd announced that the company had "adjusted the prices again at the beginning of the year" after the VAT cut had expired. Germany's largest grocer, Edeka, is closely following developments: "We are monitoring the competition and will continue to offer our customers competitive prices in the future," explained a spokesman.
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