Reduced VAT not entirely alleviating pressure on fine dining establishments
The German hospitality industry is bracing itself for significant changes on January 1, 2026. Dehoga CEO Ingrid Hartges has voiced her concerns about the upcoming minimum wage increase, while also expressing optimism about the VAT reduction on food in restaurants.
Hartges emphasised the importance of securing the existence and strengthening the culinary diversity in the catering industry. This includes not just traditional dining experiences, but also takeaway and delivery food offerings. The minimum wage increase, which will result in an over eight percent rise for restaurants and inns, will be used to invest and create attractive offers for guests, according to Hartges.
However, the reduction of VAT on food in restaurants from 19% to 7% does not guarantee price cuts for guests. The impact on consumer prices depends on various factors, such as business cost pressures and individual business strategies.
Rising operating costs and inflationary trends may absorb the benefits of the tax cut rather than allowing for price reductions. Moreover, restaurants decide independently whether to lower prices or keep them stable to improve margins. This context suggests that price cuts for guests are not automatic and depend on broader economic factors and business choices.
The hospitality sector in Germany has recently faced declining sales, rising costs, and insolvencies. Two-thirds of food establishments report financial difficulties, making it challenging to reduce prices even with tax relief. This context suggests that the VAT reduction provides potential financial relief, but it is not a direct or guaranteed driver of lower restaurant prices.
In a statement documented by "Welt" and "Business Insider", Hartges did not agree with Federal Finance Minister Lars Klingbeil's expectation that the VAT reduction on food in restaurants should be passed on to customers. Hartges expressed concerns about the upcoming minimum wage increase, suggesting that the industry may struggle to absorb the additional costs.
As the industry prepares for these changes, it is clear that the road ahead is not without challenges. The hospitality sector will need to navigate the complex interplay of minimum wage increases, VAT reductions, and business pressures to ensure a sustainable future for culinary diversity in Germany.
Hartges, in a statement, expressed disagreement with Federal Finance Minister Lars Klingbeil's expectation that the VAT reduction on food in restaurants should be passed on to customers, citing concerns about the upcoming minimum wage increase and its potential impact on business finances. In the face of these changes, the finance and business strategies of restaurants will play a crucial role in determining whether they can invest in strengthening culinary diversity and providing attractive offers for guests, or if they will struggle to absorb the additional costs.
