German VAT hike debate divides leaders as Merz leaves door open
A potential VAT increase has sparked debate among German political leaders. Chancellor Friedrich Merz avoided ruling out the possibility during a government question session on Wednesday. Meanwhile, state leaders and opposition figures have strongly opposed the idea.
In the Bundestag, Merz did not commit to a VAT hike but left the door open for future discussions. He stressed that the government's focus remained on easing financial pressure for citizens and businesses. He also noted that the current reduced VAT rate for certain sectors could be cut further.
Criticism came swiftly from multiple directions. Steffen Krach, the SPD's lead candidate for Berlin's governing mayor, warned that raising VAT would disproportionately affect low- and middle-income households. Mario Voigt, Thuringia's CDU Minister-President, argued it would place an unfair burden on ordinary people. Other regional leaders joined the opposition. Manuela Schwesig, SPD Minister-President of Mecklenburg-Western Pomerania, declared that a VAT increase 'must not happen under any circumstances'. Michael Kretschmer, Saxony's CDU Minister-President, called the idea 'the exact opposite of what we need right now'. Despite the speculation, no formal legislative proposals for a VAT increase have been introduced in the past year. Instead, the government recently made permanent a reduced 7% VAT rate for restaurant meals, starting January 1, 2026, as part of broader relief measures.
The chancellor's comments have triggered a wave of resistance from both coalition and opposition figures. While no official plans for a VAT increase exist, the debate highlights ongoing concerns about economic pressures on households. The government's recent tax cuts for certain sectors remain in place for now.
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