SHARE
COPY LINK

MONEY

German Agriculture Minister wants to scrap VAT on fresh food

The German Agriculture Minister Cem Özdemir (Greens) has joined consumer groups in calling for temporarily scrapping VAT on fruits and vegetables to help ease the cost-of-living crisis for the poorest households.

Cem Özdemir, Federal Minister of Food and Agriculture, stands with a leek in his hand in front of the Ministry of Agriculture during the protest action of the
Cem Özdemir, Federal Minister of Food and Agriculture, stands with a leek in his hand in front of the Ministry of Agriculture during the protest action of the "Wir haben es satt!" (we are fed up). Photo: picture alliance/dpa | Fabian Sommer.

In response to the significant increases in food prices in recent months, social and consumer groups have been calling for the abolition of value-added tax on certain fresh foods.

READ ALSO: German consumer groups demand VAT cut on fresh food

The calls follow a recent amendment to EU law, which makes it now theoretically possible for member states to scrap VAT on fresh food.

Federal Agriculture Minister Cem Özdemir (Greens) has now also come out in favour of these proposals, saying he personally supports the renewed calls for the abolition of VAT on fruit, vegetables and pulses (such as beans, lentils and peas).

Özdemir told the German Press Agency: “In the debate on the first relief package, I had already indicated that a reduction in VAT on healthy foods would particularly benefit those who have little or no financial leeway.”

“If we make fruit and vegetables cheaper, we not only relieve consumers comparatively inexpensively, but we would also promote a healthy diet,” the Green politician said.

However, he added that putting such a measure into action would be a matter for the Ministry of Finance.

READ ALSO: Will Germany reduce VAT to ease the cost of living crisis?

A temporary scrap of value-added tax on fresh food could help people with low incomes in particular as, according to the German Institute for Economic Research (DIW), they spend a larger proportion of their monthly income on food than people with high incomes.

President of the DIW, Marcel Fratzscher, told the Augsburger Allgemeine newspaper: “The German government should temporarily abolish the reduced VAT rate of seven percent, as this would make food and other basic necessities cheaper, and help people quickly and unbureaucratically.”

Criticism from economists and retailers

The proposed measure has received criticism from some quarters, however.

Vice president of the Kiel Institute for the World Economy, Stefan Kooths, told the Rheinischer Post newspaper that that rising prices reflect greater shortages that the state cannot eliminate.

READ ALSO: The products getting more expensive and harder to find in Germany

“If the state wants to effectively do something about higher food prices, it should think about freeing up farmland,” he said.

The German Trade Association (HDE) also criticised the proposal. They said that an end of to food VAT – a so-called “flat” tax that charges the same to all households regardless of income – would favour those who are able to manage cope with the rising prices.

“Instead, the federal government should increase state benefits accordingly and, if necessary, make appropriate improvements in its relief package,” they said.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

MONEY

Why German bank customers could soon pay less for their account

A major German bank is set to scrap fees on large balances - and a number of others look set to follow. Here's why people in Germany may be paying less for their savings or current account in the near future.

Why German bank customers could soon pay less for their account

What’s going on? 

Interest rates have been at rock-bottom levels for years, making it much harder for people to get returns on their savings.

In recent years, many banks have even been levying what’s known as negative interest rates on customers. If interest normally incentivises people to save by helping them to grow their money, negative interest basically does the opposite.

If you have a certain amount of money in the bank, your bank will charge you negative interest via a deposit holding fee, which will usually be a certain percentage of your balance.

With N26, for example, balances of over €50,000 are subject to a 0.5 percent fee each year. For a balance of exactly €50,000, that equates to €250 in bank charges just for keeping your money there. 

Some banks even charge a deposit holding fee for balances as low as €5,000 or €10,000 in a current account. 

On Tuesday, ING Deutschland became the first bank to announce that it would be scrapping negative interest rates for the vast majority of its customers.

From July 1st, new customers of ING will be able to deposit up to €500,000 in their account without being charged for it, while existing customers will automatically have the fee-free amount raised to €500,000 from the current €50,000. 

Now, it seems a number of other German banks are planning similar moves. 

Why is ING Deutschland ending the holding fee?

Not entirely out of the goodness of its own heart – though that doesn’t stop it being good news for customers.

The European Central Bank (ECB) is set to make a decision on interest rates in the bloc this July, and most people expect that the bank is poised to increase interest rates from minus 0.5 percent to zero. 

Since banks have basically been passing on the ECB’s fees to their own customers, a hike in the ECB’s interest rate would spell the end of most negative interest-rate accounts in any case. But ING Deutschland said it wanted to pass on the positive interest rate trend to its customers even earlier.

READ ALSO: EXPLAINED: How to save money on your taxes in Germany

“With the increase in the fee-free allowance for credit balances on the current and extra accounts, the deposit fee is no longer applicable for 99.9 percent of our customers,” said Nick Jue, chief executive officer of ING in Germany. “We were one of the last banks to introduce a deposit holding fee and one of the first to virtually abolish it.”

He added that the bank had already kept its promise to abolish the holding fee for almost all customers before the European Central Bank made its decision.

Does this have anything to do with that court decision on bank charges?

That’s definitely a factor. According to a decision in Germany’s Federal Supreme Court last year, credit institutions have to obtain the consent of their customers when making changes to their fees and conditions.

That means that financial institutions have to ask for consent to current fees retrospectively if they don’t want hoards of people trying to claim their money back.

If a customer doesn’t consent to the fees, the bank will usually close that customer’s account.

Man signs a contract

A man in a suit fills in an official form. Photo: picture alliance/dpa/Pixabay | hnw-Gruppe

According to ING Deutschland, the scrapping of negative interest rates on balances up to €500,000 may help to sway those customers who have not yet agreed to the latest terms and conditions – including the deposit holding fee.

Anyone who agrees to the Ts&Cs will automatically be given the higher allowance as of July 1st.

“ING Deutschland expects that the increase in the allowances will convince in particular those customers who have not yet agreed to the General Terms and Conditions including the holding fee, and that the bank will thus terminate fewer customers than last planned,” ING said in a press release. 

READ ALSO:

What other banks are planning to do this?

According to reports in Bild and Bialo, the other banks planning on ending negative interest rates (or raising the threshold for fee-free balances like ING Deutschland has done) include:

  • Deutsche Bank
  • Commerzbank
  • Deutsche Apotheker- und Ärztebank (Apobank)
  • Dortmunder Volksbank
  • Hamburger Sparkasse (Haspa
  • Frankfurter Sparkasse
  • Frankfurter Volksbank
  • Mittelbrandenburgische Sparkasse
  • Nassauische Sparkasse (Naspa)
  • Ostsächsische Sparkasse Dresden
  • Sparda-Bank München
  • Sparda-Bank Südwest
  • Sparda-Bank West
  • Sparkasse Hannover
  • Sparkasse Pforzheim Calw
  • Volksbank Stuttgart

What does this mean for my savings?

There’s good news and bad news.

The good news is that, from July, you’ll no longer have to pay exorbitant charges just to store your money in a safe place – and you won’t be penalised for saving more. The bad news, on the other hand, is that low interest rates aren’t going away anytime soon.

So while you won’t be losing money hand over fist, you won’t be earning much of a return on your savings either.

Banks in Frankfurt

Skyscrapers in the financial district of Frankfurt am Main. Photo: picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

“If the interest rate environment continues to develop positively, we will also let our customers participate in this development,” said ING Deutschland’s Nick Jue. “However, the low-interest phase will continue for the time being and broadly diversified investments will remain important.”

Getting a securities account where your money is invested is one way to try and grow your savings, as is investing in property.

Of course, people with mortgages and other loans benefit from the low interest rates – which could be why the German property market is currently booming. 

READ ALSO: Five ways Germany’s soaring inflation could affect your life

SHOW COMMENTS