Why do unemployed people pay VAT?

Economic stimulus package: help against rising unemployment?

At the press conference on the economic stimulus package, Chancellor Angela Merkel said that the corona-related economic crisis was a "Brave answer" need.

After 21 hours of negotiations, the Grand Coalitions gave this answer on Wednesday evening. A total of 57 measures to stimulate the economy in the Corona recession are to be implemented in 2020 and 2021. The GroKo deviates from the usual course: Instead of saving and securing as usual, a lot of money is invested. It will strengthen with the planned 130 billion euros not only the economy, but also the socially disadvantaged. A change that is particularly important after the publication of the current unemployment figures by the Federal Employment Agency.

Unemployment rises, short-time work at record levels

Because the unemployment rate continues to rise and climbed 0.3 percentage points in May to 6.1 percent. This means that Germany currently has 2.813 million unemployed, 169,000 more than in the previous month. It is true that the number of unemployed rose even more drastically in April with 300,000 new unemployed. However, the comparison with the previous year shows: In May 2019, the number of unemployed was around half a million lower than it is today.

The number of short-time workers is also at an all-time high. As early as March, 2.02 million people were registered on short-time work, the previous high was 1.44 million and was counted in March 2009 during the financial crisis. Meanwhile it is Number of short-time workers to 7.3 million gone up.

Lower VAT to boost domestic consumption

The biggest surprise of the decisions is undoubtedly the reduction in VAT. The tax rate drops from 19 to 16 percent, the reduced rate from seven to five percent. CSU chairman Marcus Söder calls the reduction "the heart" of the resolutions.

The goal is to to stimulate private consumption among citizens and thus strengthen the domestic economy. The cost of the regulation in force from July 1 to December 31: 20 billion euros. Business professionals are also amazed at this step. Economist and university professor Jens Südekum tweeted: “Hardly anyone had any plans for a temporary VAT reduction. The surprise was a success."

Since VAT is levied on services and goods, benefits from a lowering of every citizenregardless of income. Finance Minister Scholz was confident that the benefits would also be passed on to the public in the form of lower prices from the economy.

What is in the stimulus package for families and consumers?

Families can look forward to more money. For every child entitled to child benefit there should be one One-time payment of 300 euros give. This has to be taxed, but is not counted towards the basic security - an important point for socially disadvantaged families. In addition, one billion will be invested in the construction and conversion of daycare centers and crèches in order, among other things, to improve the hygiene situation. Further two billion is the covenant in the Digitization of schools and all-day care.

Both electricity costs Consumers can also look forward to relief. From 2021, the EEG surcharge for promoting green electricity systems is to be reduced with subsidies from the federal budget. The surcharge is currently 6.76 cents per kilowatt hour, but according to experts it would increase significantly in the next year. A reduction to 6.5 cents is planned for 2021.

After heated discussions - criticism came mainly from the SPD - the federal government has refrained from paying a purchase premium for gasoline and diesel cars. The so-called "Environmental bonus" for electric cars doubled. Until the end of 2021, buyers of an e-car that costs a maximum of 40,000 euros will receive funding of 6,000 euros. In this context, 2.5 billion euros are also to be invested in the charging network for electric vehicles and research into battery cells.

What kind of support helps to keep jobs?

As a result of the corona pandemic, social spending will increase. Because if fewer people pay into the coffers due to higher unemployment figures, these few usually have to pay more to finance the expenses. With the "Social guarantee" wants the GroKo Protect workers' net income. Social contributions are to be capped at a maximum of 40 percent. The federal government intends to cover the rest of the financial needs of the pension and health insurance funds. In 2020, 5.3 billion euros are planned for this.

For companies in particularly polluted sectors are "Bridging Aids" planned. This is primarily intended to save medium-sized and small companies and their jobs. The grand coalition plans to invest a maximum of 25 billion euros for the period from June to August. A maximum of 150,000 euros for fixed operating costs be requested. The businesses that benefit include restaurants, clubs, bars, hotels and travel agencies.

Tax relief should also strengthen the liquidity of the companies. For example, depreciation rules are being revised and the so-called tax loss carry-back is being expanded. Losses from the crisis can be offset against profits from the previous year in the current year.