Clemens Fuest pushes for uniform 19% VAT in Germany with low‑income household credit

Ifo Institute president Clemens Fuest has called for the abolition of Germany’s reduced 7 % value‑added tax rate. He proposes that all goods and services – including food, public transport and cultural tickets – be taxed at a single 19 % rate. If the higher rate were passed on in full, prices could rise by up to twelve percent, though Fuest expects a smaller effect because firms will not transfer the whole increase. The reform is presented as a way to simplify the tax system and generate additional state revenue. After accounting for a proposed annual credit of €360 for households with incomes below €55 000, the government would still collect more than €36 billion per year. The credit is intended to offset the burden on low‑income families, but analyses suggest that poorer households could still face a net loss of around two percent of their disposable income. The proposal has sparked a public debate over its impact on consumer prices, purchasing power and social equity.