Court of Auditors rebukes Lindner over unclear value-added tax matters.
Germany's federal budget for 2025 is facing a deficit, with Finance Minister Lindner imposing significant spending cuts for various ministries. Despite this, the Federal Court of Auditors (FCA) has found that an additional 35 billion euros could be collected if Lindner implemented a long-promised tax reform.
The FCA claims Lindner has been negligent in reducing tax evasion. The "Spiegel" reported that the auditors are demanding Lindner reconsider existing value-added tax (VAT) exemptions. There's a "huge opportunity for increased tax revenue" in this area, the FCA's recent report states.
The review of reduced VAT rate reform has been "long overdue," according to the "Spiegel," quoting the report. This tax exemption for consumers costs around 35 billion euros annually. The FCA urges Lindner to review the exemptions' catalog since "these additional revenues are crucial for the stabilization of the public finances."
The seven percent reduced VAT rate aims to keep prices low for daily necessities and promote social justice. It primarily covers food, cultural events, and services offered by charities, religious organizations, and churches. Travel expenses are also exempt. Printed matter, like newspapers and books, also benefit from this low tax rate.
Exemptions are becoming more and more significant
The arbitrary selection of exemptions has sparked debate for years. There are examples where consumers enjoy lower rates for expensive hotel stays. There's also the issue of inconsistencies, such as coffee with milk being taxed at 19 percent while a latte macchiato is taxed at 7 percent. These distinctions would create unnecessary bureaucracy for restaurant owners.
Instead of reforming the reduced tax rate, the Federal Ministry of Finance (BMF) has been expanding the tax exemptions. From 2010 to 2021, the scope of tax-exempted items increased by 10 billion euros.
In their report, the auditors accuse Lindner of blocking the much-needed revision of the subsidization process at the Bundestag. He had promised to create a reform commission involving the affected states back in early 2023, but initiated an internal working group instead. This group acknowledged the need for reform but saw it as "politically unfeasible" due to current economic and social reasons.
The ministry allegedly withheld these conclusions from the Finance Committee of the Bundestag, according to the "Spiegel." At the time, Lindner's experts arrived at similar conclusions as the FCA, asserting that it's economically efficient to collect VAT uniformly and only make exceptions in justified cases.
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Source: www.ntv.de
