A Covid-era tax break on meals and catering, extended due to inflation, is set to end on January 1st, when Germany's value-added tax, or VAT, shoots back up to 19% from the 7% rate that's been in effect since 2021.
The tax break, which has helped keep the prices of restaurant meals and catering from sharp rises, is estimated to cost the national budget about €3.4 billion a year. Caps on energy prices, which were part of the same economic strategy, will continue, but only until the end of March.
Catering industry groups and restaurant owners campaigned to keep the reduced VAT, saying that a return to the old rates will put many out of business as they will either have to absorb the difference, or raise prices to levels that will drive consumers away.
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