On June 29, 2020, the German Government voted to reduce VAT (value added tax) rate for six months. The standard VAT rate decreased from 19 to 16 percent between July 1st and December 31st. The reduced rate, which applies to many foods and everyday goods, decreased from 7 to 5 percent.
January 2, 2021 ist from this point of view an interesting day for the German retail sector. Six months after the temporary reduction in VAT, prices should start to rise again on the first sales day of the new year. Now, will all retailers raise prices again? "The competition in the German retail sector is brutal. That is why it will not be easy for retailers to pass on the price increases", says Prof. Dr. Martin Fassnacht. He also pointed out: "Discounters such as Aldi and Lidl will find it particularly difficult to take such a step. This is because they have lost market share to the supermarkets during the pandemic".
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