The anticipated reduction in Value Added Tax (VAT) for the German hospitality sector, slated to take effect on January 1st, 2026, is facing a stark reality check. Industry leaders are warning that the measure, intended to alleviate financial pressures, is likely to be entirely offset by the concurrent and significant increase in the minimum wage. This casts serious doubt on the government’s stated aim of providing consumer relief through lower prices.
Thomas Geppert, State Managing Director of the Dehoga Bayern (the Bavarian Hotel and Restaurant Association), acknowledged the potential for the tax cut to counteract certain cost increases in a recent interview with “Bild”. However, he stressed that broader economic trends still necessitate a focus on easing burdens for businesses. His comments reflect a deeper concern within the sector – that the tax break represents a largely symbolic gesture rather than a genuine solution.
Patrick Rothkopf, President of Dehoga Nordrhein-Westfalen, echoed Geppert’s sentiments, describing the current situation as “exceptionally strained” and pointing to “extremely high cost pressures” that will be exacerbated by the impending minimum wage hike, currently scheduled to rise from €12.82 to €13.90 per hour. He explicitly stated that consumers should not anticipate any price reductions as a result of the VAT reduction.
The decision by the Federal Council to permanently reduce the VAT rate on food in restaurants from 19% to 7% was framed as a vital support mechanism for a sector struggling with inflation and rising operational costs. However, critics are now questioning the political calculus behind the policy, arguing that the simultaneous increase in the minimum wage – a measure also intended to improve living standards – effectively negates any potential benefits for consumers.
The situation highlights a more fundamental challenge for the German government: balancing the need to support businesses with the commitment to ensuring a fair wage for workers. While the VAT cut may superficially appear advantageous, its actual impact is likely to be muted, ultimately failing to deliver on the promise of lower prices and raising concerns about the effectiveness of targeted economic interventions. The long-term consequences of these conflicting policies on the competitiveness and pricing strategies of the German hospitality industry remain to be seen.
