The Great Coalition plans to reduce the value added tax for hotels and restaurants to 7 %. To be sure, nobody can say if this is still true tomorrow. Yet is is a remarkable announcement that makes me wonder.
In Germany, a mercantile company pays 19 % tax on everything it charges. Acquiring products costs him an extra 19 % that are deducible. Depending on the company margin, the entire tax ratio will only increase by a few per cent.
A German service provider pays 19 % value added tax. On the opposite side of the money inflow, there are basically the wages to be paid. They do not yield deducible pre-tax. The balancing of value added tax, for example when buying laptops, is hardly worth mentioning. The same is true for company cars (the deducibility of which is arguable with respect to it being entirely justifiable – it might just be a way of subsidizing a totally different industry).
Depending on his income and family situation, a service provider has to “donate” a significant part of his wages to the state in the form of taxes and social benefit payments. Almost the entire sales tax goes to the federal budget. Then come the business tax, income tax, solidarity overhead and a number of other obligatory payments (employer’s liability association, contribution for the handicapped, chamber of trade,…). It is quite easy to show that a service provider employing many unmarried and well-paid people has to give half of his turnover to the state. In other words, more than half of the sum total in Euros on the bill make their way to the federal budget!
In this respect, restaurants and hotels are a mixture: on the one hand, a significant part of their creation of value is service, yet as opposed to “normal” service providers, they also have a considerable item list of products they buy (deducible by 7 % or 19 %), building and energy costs, and the like (all at 19 %).
Why should it be tolerated that some few service industries are privileged, even though only part of their creation of value is achieved by “employed labour”?
Or in other words:
Wouldn’t it be a brilliant idea in our economic situation to fight unemployment by reducing the value added tax for all service providers?
Well, justice and common sense will never be applied when it comes to tax legislation.
RMD
(Translated by EG)
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