VAT increase: Alarm bells ringing in the confectionery industry

The reduced VAT rate of 7 percent on food in restaurants could be abolished by the end of the year. Cakes and snacks would then be subject to the standard 19 percent VAT rate again. Germany's pastry chefs are alarmed.

Since July 1, 2020, it has been noticeable Dining in cafes, restaurants or at catering events is reduced VAT rate of seven percent This exceptional regulation was introduced due to the Corona pandemic. Because of the war in Ukraine and the resulting sharp rise in energy prices, its duration was extended several times until the end of 2023. The regulation is now expected to expire at the end of 2023.

The German Confectioners' Association (DKB) warns of the consequences of the VAT increase. Everything that customers would be affected. eat on-site in the café, including cakes, pastries, savory dishes, snacks, breakfast or ice cream.

A higher sales tax would apply also for deliveries ...that is, in catering and party services, the association reports. Just like that. Bakery and the hotel and restaurant association dehoga Confectioners are demanding that the value-added tax be retained and not, as currently planned by the coalition government, increased. 1 January 2024 up again 19 percent is raised.

A final decision has not yet been made. Traffic light coalition will only be with the Budget consultations Form an opinion on this topic starting in September. 

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Update from August 14th: SPD leader Saskia Esken spoke out in her ARD summer interview in favor of the Retention of the reduced VAT rate of 7 percent on food in the catering industry pronounced.  The Federal Association of System Catering (BdS) reports that the number of supporters is growing not only within the food production industries and the catering sector, but also in politics.

"26,8 percent of the total revenue of the confectionery trade would be affected"

Gerhard Schenk, President of the German Confectioners' Association. Photo: © German Confectioners' Association

The Confectioners' Association has now addressed a letter to the members of the German Bundestag, demanding... Retention of the 7 percent rule"An increase in the VAT rate, which would also affect our pastry shop cafés, would be a A complete and utter misjudgment“26,8 percent of the total revenue of the confectionery trade would be affected,” he says. President of the German Confectioners' Association, Gerhard Schenk.

The businesses would still in crisis mode Schenk therefore assumes that many businesses would have to pass on a tax increase entirely to their guests.

"The increase in tax revenue is far too short-sighted, because this permanent additional burden threatens an overall decline in sales, which in turn will permanently and sustainably destroy businesses and jobs, and thus drastically reduce tax revenue again. Therefore, this increase would currently be the completely wrong measure at the completely wrong time."

Is coffeehouse culture in Germany at risk?

Gerhard Schenk continued: "Our demand is clear, the reasoning unambiguous: politicians must refrain from this tax increase because neither the confectionery trade nor the customers are out of the woods yet. We will also inform the members of parliament of this in a letter and thus draw attention to the situation."

The crisis is not yet over. Customers are more likely to forgo visits to pastry shops and cafés if prices are higher, which will lead to a decline in revenue. "If this tax increase were to be compounded by higher costs for raw materials and energy, in addition to the minimum wage increase, it would be a real disaster." A danger not only to the confectionery trade, but also to the coffeehouse culture in Germany."Schenk warns. Hospitality should not become a luxury. 

Background: The German Confectioners' Association represents the interests of approximately 3.460 confectionery and café businesses. According to the association, the confectionery trade employs nearly 68.000 people in total, 4.000 of whom are apprentices.

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