Budget committee approved VAT increase

As was announced by the news service of the Lower House of German Parliament, on Wednesday, 17th of May 2006, the budget committee among other things approved a VAT rise from 16 to 19 percent from January 1st of 2007. After having discussed the draft by the Federal Government on the accompanying budget law 2006 (16/752) the coalition parties CDU/CSU and SPD voted in favour of the law, the opposition parties of FDP, leftists and B√ľndnis 90/greens voted against it.

The six leading German economic research institutes in their spring expert opinion had already cautioned against an economic slow down due to the planned VAT increase. The increase is also rejected by the majority of trade associations and experts representing small and medium-sized entities (SME), because the negative effect on SME is easily predictable. A PDF version of the complete spring expert opinion is available at the German Institute for Economic Research (DIW Berlin) as download. GERMAN