EASING THE BURDEN ON FAMILIES
Reduction in VAT
The many reliefs for VAT have been a source of debate for many years. Families in particular could benefit from them, because reducing VAT would help low- and mid-income families far more than the widely discussed income tax reforms.
Financially fair to families
We experienced for ourselves how quickly and consistently VAT rates in Germany could be reduced at the start of the coronavirus crisis. Reducing VAT on selected children’s products and services, as a means of easing the financial burden on young families, was brought up again and again but so far without significant result.
“Many industries and products are supported by the reduced VAT rate of 7% – not families, though,” complains Sven Iversen, Managing Director of the AGF, the Association of German Family Organisations. The AGF linked up with JAKO-O and other society and commercial associations, organisations and institutions in 2011 with the ‘Fair taxation of added value – 7% for children’ initiative. So far, though, there has been no VAT reform to the benefit of families.
The EU Commission, however, has tabled a proposal for greater flexibility in VAT rates in Europe, under which Germany would be able to set lower rates for certain children’s products. The effect of such a step has even been scientifically established, as experts from the German Institute for Economic Research (DIW) in Berlin have also suggested reducing VAT. This is because those on lower incomes would see a significantly greater benefit from such a move than from, say, reductions in income tax.
For families on lower or middle incomes in particular, VAT represents a large part of the money they have at their disposal to spend on the everyday necessities of life. After this, there is often not a lot left for good quality children’s safety items, which is why they often opt for cheaper, and frequently less safe alternatives.
The Association of the German Nursery Products Industry is therefore calling for certain products and services for children to be subject to reduced VAT rates. The list covers the following items: