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German labour tax cuts call from OECD hint at VAT rate increase

  • VAT
  • 16 May 2014 | Richard Asquith

German labour tax cuts call from OECD hint at VAT rate increase

The latest report by the Organisation for Economic Co-operation and Development (OECD) on Germany’s economy point out that labour taxes remain too high, and that it needs to look at other revenue sources

German VAT increase to 19% to cut labour taxes

The OECD’s survey of the German economy has highlighted that Germany is still excessively reliant on labour taxes compared to other European competitors.  This could hamper its ability to sustain its recent economic strength in the medium to long term. In particular, there is a distorted burden on lower-paid staff.

Germany’s VAT rate is 19%, which is significantly below the EU average of over 21%. Germany last raised its standard VAT rate in 2007 when it increased from 16% to 19%. That was mainly to fund a cut to the employer taxes, but also to help meet the Euro currency deficit requirement of 3% of GDP.

The problem of tax revenues will increase as new pension liabilities kick-in this year and 2015.


VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.