Berlin (Reuters) – Chancellor Angela Merkel and Finance Minister Olaf Scholz reject a possible extension of the planned VAT cut beyond December 31, 2020.
“For me, this is a deadline,” said Merkel on Thursday on ZDF. In the ARD, the CDU politician added: “We could not afford the financial losses in the long run. We would incur such unacceptable debts.” Vice Chancellor Scholz (SPD) also insists on the agreed exit at the end of the year. The lowering of VAT is “effective because we limit it. Otherwise it has no economic effect,” said the finance minister in the “Handelsblatt”.
In the morning, CSU boss Markus Söder said that one should consider extending the VAT cut if the number of corona infections increases again in the autumn. “We all promised each other that we would not do that. The Bavarian Prime Minister was there too. I think he is a man who keeps his word,” said Scholz about the negotiations between the CDU leaders , CSU and SPD. The grand coalition has decided to reduce the VAT rate for six months from 19 to 16 percent and the reduced rate from seven to five percent. The government expects revenue shortfalls of around 20 billion euros.
Merkel emphasized that the lowering was a “short-term impulse” to stimulate consumption. Therefore, the companies would also have to pass the reduction on to the customers. “A short-term cut is just right, and also for a limited time, so that the economy gets going again,” emphasized Merkel. However, the Chancellor also admitted that the further development of the corona had to be awaited. “Of course we cannot know exactly how the pandemic will develop. There is always a degree of uncertainty,” she said on ZDF. However, the government is currently working to prevent an “outbreak of exponential type of Covid 19 cases” from happening again, she added in the ARD interview.