The temporary reduction in VAT under the Second Corona Tax Assistance Act: Unnecessary administrative burden or real relief?

Abstract

The economic consequences of the Covid19 pandemic are increasingly hitting the economic system of the Federal Republic of Germany with full force. As of June 2020, the annual average gross domestic product recorded a significant decline and an increase in the unemployment rate.

In this article we examine the current research concerning the question of the temporary reduction in VAT because of the COVID19 pandemic. We aim to answer the question if this temporary reduction is an unnecessary burden or rather a real relief for involved companies. By the method of qualitative evaluation of relevant research and by the analysis of surveys on the topic, we show that the significant burdens on businesses as a result of the temporary reduction in VAT rates under the Second Corona Tax Assistance Act are absolutely contrary to the objective of creating a countercyclical catalyst to stimulate consumption and thus to positively influence the economy.