RWI Positionen

RWI Positionen 61

Warum warten? Plädoyer für eine Umsatzsteuerreform

by Philipp Breidenbach and Tanja Kasten

09/2014, 14 S./p., ISBN 978-3-86788-567-6



The German Value-Added Tax (VAT) system is very complex. In addition to the general VAT rate of 19 percent, a reduced rate of 7 percent is levied on numerous items such as food, books, periodicals, flowers, and local public transport. Furthermore, some goods and services (such as banking and health care services or community work) are exempted from the VAT. The complexity of taxation rules and exemptions triggered many discussions on the need and potential of a VAT reform, but to date, all attempts to simplify the system have failed. However, a study by the RWI for the German Federal Ministry of Finance shows that a revenue neutral tax reform which introduces a single tax rate may increase efficiency and reduce administrative effort markedly. The average tax burden of those who earn less would increase too, but only to a moderate extent. This could be balanced by countervailing adjustments within the tax system.