Merz Rejects VAT Hike, Pledges Tax Relief After Elections
Berlin, Germany – Union chancellor candidate Friedrich Merz has firmly rejected a value-added tax (VAT) increase, citing its detrimental impact on the economy and household budgets.
"Raising the VAT would now be the greatest poison for economic recovery," Merz declared at a Christian Democratic Union (CDU) rally in Berlin. He argued that such a move would disproportionately burden private households.
"Therefore, I do not want to implement a VAT increase," Merz asserted.
He emphasized the need for tax relief for both households and businesses, which the Union will gradually implement following the upcoming Bundestag elections on September 26.
Merz’s previous reluctance to definitively rule out a VAT increase in a TV debate had raised concerns. However, Carsten Linnemann, the CDU’s parliamentary group leader, clarified that the Union is opposed to any tax hikes.
"We are very clear on this," Linnemann stated. "Our election manifesto clearly states that we will not raise taxes."
This stance extends beyond VAT to taxes in general.
Social Democratic Party (SPD) chancellor candidate Olaf Scholz has also unequivocally ruled out a VAT increase. Instead, the SPD proposes lowering the reduced VAT rate for food from 7% to 5%.
Merz’s Economic Platform
Merz’s rejection of a VAT hike aligns with his broader economic platform, which includes:
- Reducing the tax burden: Merz aims to streamline the tax system and lower taxes for businesses and individuals, particularly those on middle and low incomes.
- Promoting investment: He advocates for policies that stimulate private investment, such as tax incentives for research and development.
- Balancing the budget: Merz believes in maintaining a balanced budget and reducing the national debt. He has proposed measures to cut public spending and increase revenue.
- Supporting small businesses: Merz recognizes the importance of small businesses and pledges to create a more favorable environment for them through tax relief and regulatory easing.
- Fostering economic growth: Merz aims to create a favorable economic climate that promotes innovation, entrepreneurship, and job creation.
Differing Views on VAT
The Union’s stance on VAT contrasts with that of the Green Party, which supports a VAT increase as a means of financing climate protection measures. The Left Party also favors a higher VAT, specifically on luxury goods.
The Free Democratic Party (FDP) opposes any VAT increase, while the Alternative for Germany (AfD) supports a reduction in the standard VAT rate.
Impact on Consumers and Businesses
A VAT increase would have a direct impact on consumers and businesses:
- Consumers: Higher VAT would increase the prices of goods and services, eroding their purchasing power.
- Businesses: Businesses would face higher costs on their inputs, which could lead to reduced profits or higher prices for consumers.
Political Context
The debate over VAT is taking place in the context of the upcoming Bundestag elections, where the Union is the main challenger to the SPD. The results of the election will determine the composition of the next government and its economic policies.
Regardless of the outcome, the issue of VAT and taxation more broadly is likely to remain a key topic in German politics for the foreseeable future.
