Food & Rent: Wifo Chief Felbermayr Advocates for VAT Reduction

Wifo Chief Gabriel Felbermayr proposes a fundamental reform that does not create new budget holes, instead of a temporary reduction. To offset the loss of revenue from a reduction in value-added tax, exceptions should be removed and the higher tax rate of 20 percent slightly increased. This would not lower overall inflation, but it would make the everyday shopping basket in the supermarket cheaper.

Wifo Chief Felbermayr for Reduction of Reduced Value-Added Tax Rate

The value-added tax on all food items, which currently have the reduced rate of 10 percent, should be lowered, Felbermayr told APA, "the distinction from staple foods would be very difficult." "I would even go further and completely lower the reduced tax rate from 10 to 5 percent, then rents would also be included - in Germany, the value-added tax there is exactly 0 percent," Felbermayr told APA. "Of course, there are reduced tax rates on some products where the reduction is quite questionable. But a general debate about it, although necessary, would take time and bring resistance to the fore, which would be very hindering at the moment."

The risk that this reduction will not be passed on by companies could be mitigated by legal requirements, Felbermayr told the "SN". He emphasizes that the gap between the lower and higher value-added tax rate is larger in many countries than in Austria. Here, the rates are 10 and 20 percent, the gap is 10 percentage points. In France, it is 15 percentage points (5 to 20 percent), in Finland as well (10 to 25.5 percent), in Germany it is 12 percentage points (7 and 19 percent). Sweden is currently halving the value-added tax on food.

(APA/Red)

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