German Chancellor Proposes Lowering VAT on Food to Address Inflation

Olaf Scholz suggests reducing value-added tax on food from 7% to 5%, aiming to ease financial strain on low-income households as part of a broader election strategy.

Chancellor Olaf Scholz announced a proposal to reduce the VAT on food from 7% to 5%, citing benefits for low-income households and manageable costs for the federal budget.
The measure, estimated to cost around €4–5 billion annually, could provide an average savings of €60 per person per year if fully passed on to consumers.
Critics, including opposition parties and economists, argue the proposal lacks precision, with wealthier households potentially benefiting more in absolute terms than those with lower incomes.
Consumer advocates and social organizations largely support the idea, with some pushing for a zero-VAT policy on essential items like fruits, vegetables, and basic groceries.
The proposal comes as food prices, while stabilizing, remain significantly higher than pre-2020 levels, with some items like butter and olive oil still experiencing sharp increases.