Value-added tax helps less: Germans use child bonus for consumption

VAT is less of a help
Germans use child bonus for consumption

Families in Germany are to be helped through the corona crisis with a child bonus of 300 euros. A survey now shows that most of the money has been spent on durable goods such as furniture and computers. The lower value added tax contributed significantly less to consumption.

Most families used the child bonus of 300 euros paid out during the Corona crisis to buy durable consumer goods such as clothing, furniture or a computer. In a representative survey commissioned by the Federal Ministry of Finance in December, 60 percent of households said they wanted to spend the money on consumption, as reported by the Federal Statistical Office. For households with low incomes, this value was therefore almost 70 percent.

Households wanted to save the child bonus roughly as often, although the intention to save decreased over time. While in August 2020 – i.e. before the child bonus was paid out – around six out of ten households (61 percent) intended to set aside the child bonus in whole or in part, this only happened to around half from October 2020 – i.e. when the second installment was paid out of households (53 to 54 percent).

The child bonus of 300 euros per child entitled to child benefit was usually paid out in September and October 2020 together with the child benefit. This year there should be 150 euros.

Lower value added tax stimulates consumption less

The lower value added tax from July to the end of the year due to the corona crisis had a significantly weaker effect on consumption. In August, according to the Federal Statistical Office, 15 percent of households said they wanted to make purchases; in December this was 20 percent. Accordingly, 13 percent of households planned to make additional purchases due to the reduction in VAT in August and 16 percent in December. According to statistics, households with children in particular benefit from the reduction in VAT.

According to the editorial network Germany (RND), the Federal Ministry of Finance drew a positive balance of the measures. The RND newspapers quoted the ministry as saying that demand and the economy were effectively supported by the child bonus and the reduction in VAT.

While economic experts were still assuming a slump in economic growth of up to 7.8 percent in June 2020, the Federal Statistical Office recently determined an actual decline in economic output of 4.9 percent. This means that Germany got through the crisis year much better than any other major European economy.

. (tagsToTranslate) Economy (t) VAT (t) Child benefit (t) Corona crisis (t) Corona measures