Overview

• The draft would permanently lower VAT on restaurant food to 7% from January 1, 2026, while drinks remain taxed at 19%.
• The proposal increases the commuter allowance to €0.38 per kilometer from the first kilometer, making tax filings worthwhile for more workers than the standard expense allowance.
• Restaurants are not required to pass on the tax cut, with the bill leaving pricing decisions to businesses that may instead prioritize wages, jobs and investments.
• The Finance Ministry estimates about €3.6 billion less revenue in 2026 and cumulative federal shortfalls exceeding €6 billion through 2029, affecting both federal and state budgets.
• The package now moves to the Bundestag and Bundesrat, as debate continues over consumer benefits and distributional effects highlighted by ZEW research.