VAT increase costs seven billion Euros to German companies

According to estimates by economists of the Deutschen Postbank the VAT increase will cost German companies about seven billion Euros in 2007 which is about 1% of the total amount of corporate earnings and unearned income in 2006. However, thanks to vibrant business activity the economy can easily cope with this, think the experts of the Deutsche Postbank.

“Corporate earnings will increase strongly in 2007”, forecasts Dr. Marco Bargel, chief economist of the Bonner Bank. Furthermore, increased VAT does not burden all companies in the same way. Almost half of all the products and services consumed in Germany are exempt from VAT or a reduced tax rate is applied as in for instance the case in book trade, for food stuffs and in public local traffic. Here things have remained virtually unchanged.
All in all the Postbank experts expect an additional tax burden of 20 billion Euros as a consequence of VAT increase. Seven billion or one third of this additional burden will be absorbed by companies whereas two thirds will be borne by consumers.

A detailed report by the Postbank experts on the subject matter is available online. GERMAN