Overview

• The draft would permanently reduce VAT on prepared restaurant food to 7% from January 1, 2026, while beverages remain at 19%.
• The commuter allowance would increase to 38 cents per kilometer from the first kilometer starting in 2026, prompting criticism that higher earners benefit most.
• The Finance Ministry projects revenue shortfalls of more than €28 billion through 2030, including roughly €19 billion from the VAT cut alone.
• Finance Minister Lars Klingbeil has ruled out federal compensation to the Länder for lost tax income, heightening federal–state tensions.
• The package, which also raises tax-free allowances for volunteers, is in inter-ministerial review and still needs approval from both the Bundestag and Bundesrat.