VAT: The wave of bankruptcies among Austria’s inns did not materialize

As of: November 19, 2023 12:15 p.m

The catering industry in Germany warns: If VAT increases again, there is a risk of a wave of bankruptcies. Austria has long since returned to the VAT from the pre-Corona era – and has had completely different experiences.

If you go to a Viennese inn on Friday lunchtime, you will usually find it quite busy. The gastronomic scene in Austria’s capital is very lively. The number of companies has actually grown in recent years. Nationwide the number is at least stable. Neither the Corona crisis nor the high and persistent inflation in Austria have led to a wave of bankruptcies – nor has the reintroduction of VAT rates from the pre-Corona period on January 1, 2022.

20 percent is due on beverage sales and ten percent on food. A significantly reduced rate of just five percent applied for about a year and a half – from the first Corona summer of 2020 to the end of 2021. The increase to the normal rates from 2022 had no apparent consequences for the catering industry. In the year after the reintroduction, fewer restaurants went bankrupt than in 2019, the year before Corona.

The exact effect of the reduction cannot be measured

It is impossible to quantify what effect the reduced VAT had on the companies’ profits. Due to numerous lockdowns, many houses were temporarily closed during this time or only offered delivery services. This distorted the market to such an extent that the effects of the VAT reduction could not be taken into account. A study in mid-2021 came to the conclusion that the reduction would probably help companies, but did not provide any figures.

In any case, the tax cut did nothing for the guests. Immediately after the reduction in VAT, prices in Austrian restaurants even rose by four percent. Since then they have continued to rise. While the inflation rate in Germany was recently 3.8 percent, in Austria it was 5.4 percent. The catering industry is considered one of the main drivers: Prices in hotels and inns in October were on average eleven percent higher than a year ago.

Cornucopia of government money

Why is the inn in Vienna still always well attended? In recent years, the Austrian state has emptied a cornucopia of state money on its citizens. Climate bonus, anti-inflation bonus, electricity price cap and so on and so forth. Money that may also have benefited the catering industry.

Economists even say that the windfall has fueled demand – and thus inflation has risen. True to the motto: people just pay for it.

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