VAT increases
After the Corona shock, the catering industry is threatened with a wave of bankruptcies – one in eight businesses is at risk
Many catering businesses are struggling to make ends meet after the corona pandemic. They lack staff and customers willing to spend – and now taxes are set to rise again.
Rising prices for energy and food as well as a shortage of personnel are causing problems for the industry. Now, according to the wishes of the federal government coalition, the VAT on food in restaurants, which was reduced from 19 percent to 7 percent during the corona pandemic, should be raised back to the normal rate on January 1, 2024. Bavaria has requested this Friday’s meeting of the Federal Council to extend the reduced sales tax to beverages and make it permanent. The mediation committee should be contacted for this.
Shortage of staff, increased prices and lack of customers
According to Crif, one in eight companies (12.6 percent) in the catering industry is now threatened with bankruptcy – and the trend continues to rise. Due to the planned return to the normal VAT rate on food at the turn of the year, industry observers expect further bankruptcies. “The increase in VAT will further aggravate the situation, especially for catering establishments that are already financially struggling,” explained Crif managing director Frank Schlein. Before the pandemic, only 10.7 percent of companies were considered at risk of insolvency. This year, Schlein expects around 1,600 insolvency cases in the catering industry, 36.5 percent more than in 2022. “In the coming year, insolvencies in the catering industry will continue to rise,” predicted the financial expert.
The Dehoga Association has not yet given up hope for a permanently reduced tax on food, explains managing director Ingrid Hartges. For decades, people have been calling for equal tax treatment of food in restaurants and cafés with take-away food, for example in supermarkets and food delivery. “It cannot be the case that only the food on our porcelain plates will be taxed at 19 percent from January 1st. Tax fairness looks different,” Hartges told the dpa.
From Belgium to Cyprus
The state eats with us – that’s how high the taxes in the catering industry are in Europe
According to figures from the Federal Statistical Office, even with the lower tax rate, the price-adjusted sales of the companies in September were 12.6 percent below the level of 2019. Drinks-oriented pubs have been particularly hard hit, as they were hardly able to benefit from the VAT reduction on food that has since been reduced. In the beverage serving area, revenue fell by 34.5 percent within four years. Restaurants, pubs and cafés had to cope with a gap of 8.1 percent.
Sales in the catering industry lower than before Corona
With falling sales and after temporary lockdowns, the number of employees has also shrunk. In September it was 4.0 percent higher than a year ago, but still 6.7 percent below the pre-crisis level of 2019. In the fight for staff, which has become scarcer during the pandemic, companies cannot enjoy good earning potential despite some tariff increases refer. According to the Federal Office, in October 2022, exactly half of catering employees worked on low wages – compared to 15.2 percent in the economy as a whole.
The NGG union therefore considers the labor shortage to be of its own making. “Without restaurant professionals, cooks and specialists to keep the shop running, opening times will have to be even shorter and the menus will have to be even smaller in the future, meaning sales will continue to shrink,” warns NGG boss Guido Zeitler. He calls for a real new start for the industry: “Wages must rise across the board and the collective agreements must finally be applied by all employers. Only with better working conditions and fair wages will the industry become attractive again and can close the large personnel gaps.”
Dehoga relies more on impulses from the state. “We need more incentives on the labor market to make it worthwhile to take up work,” says Managing Director Hartges. “We are the industry of opportunities and integration. Once you start working, you also get opportunities for more qualified jobs.”