How was the tax collected before 1961

Background current

On January 1, 1968, the "value added tax" was levied for the first time in the Federal Republic of Germany. It is an important source of money for the state - and has been the cause of heated political disputes for decades. This is not just because baby diapers are still taxed more heavily than cat food.

A receipt with the reduced (7 percent) and the regular VAT rate (19 percent) lies on a table in Cologne on Sunday (June 28, 2009). (& copy dpa)

In the first weeks of 1968 there was great perplexity in the car dealerships of the republic. At the beginning of 1968 the price tags were missing in the Mercedes-Benz salon on Hamburg's Ballindamm. Audi, Fiat and Ford showed their prices in the Hanseatic city "ex works". Only at Renault was the addition "including VAT" on the price tags from the New Year. to read. Because: On January 1st, 1968 value added tax was introduced in its current form in the Federal Republic of Germany.

The "VAT rate" is now 19 percent and applies to the sale of goods and services. The VAT is part of the price and is paid by the buyer, but has to be paid by the seller to the tax office. The reduced tax rate of seven percent applies to groceries, flowers, books, public transport tickets, etc. Most medical services (exceptions are e.g. cosmetic operations) are exempt from tax.

When it was introduced in 1968, the standard rate was ten percent; everyday goods were taxed at the reduced rate of five percent. By the end of 1967 there had already been a "sales tax", but the rates were significantly lower - most recently at four percent.

The big disadvantage of the old sales tax was that it had "cumulative effects". From wholesaling to intermediate trade and retailing: every time goods are bought or resold, sales tax was levied - and passed on to the next trading partner. For example, until a pound of coffee had reached the supermarket shelves, it could happen that the sales tax was added several times to the value of the goods and was therefore included several times in the sales price.

The new "VAT" is deductible

That is why the most important innovation in 1968 was that VAT (which by definition represents a specific form of VAT) was "pre-tax deductible" for companies and the self-employed. So whoever made a business expense received the VAT included in the price back from the tax office on presentation of the corresponding receipt. This meant that the amount no longer had to be added when goods were resold.

The car dealers got their cars delivered directly from the factory, the cumulative effects of the omitted sales tax were manageable. Therefore, at the beginning of 1968, many of them hesitated, out of consideration for private customers, to show the actual price increase due to VAT. Other industries, however, made a virtue out of necessity: At that time, a large, red "V" for "input tax" was stuck on many taxis. A note for business customers that the VAT was shown separately on the receipt.

The first VAT increase followed in the same year: the regular rate was raised to eleven percent in July 1968 and the reduced rate to 5.5 percent. By 1998 there were five further increases in the regular rate, each by one percentage point. The reduced rate has remained stable at seven percent since July 1983.

The largest VAT increase to date came in January 2007

In the 2005 Bundestag election campaign, the SPD campaigned not to increase VAT. The Union, on the other hand, wanted to push through an increase in the regular rate by two percentage points. When the CDU, CSU and SPD negotiated the coalition agreement, they agreed on a memorable compromise: the regular rate would be increased on January 1, 2007. And not by two, but by three percentage points. The proceeds were to be used to reduce unemployment insurance contributions and to reorganize the budget.

In 2015, the state received a total of 159 billion euros in sales tax. Of this, the federal government received 52 percent, the states 45.5 percent and the municipalities - according to the Federal Ministry of Finance - "a good two percent". After income tax, it is the most important source of tax money for public budgets. If you add the import sales tax levied on foreign goods, the "taxes on sales" were as much as 209 billion euros.

When is the Bockwurst taxed regularly? And when is it reduced?

Although VAT is so important to public finances, it is currently less of a focus of public debate. In most EU countries, the regular VAT rate is over 20 percent. In Hungary, the EU maximum rate of 27 percent VAT is levied. Luxembourg has the lowest rate at 17 percent. At 19 percent, Germany is at the lower end of the scale.

The points of contention are still the differences between reduced and regular VAT rates. Which products and services are taxed lower? And which ones not? The debate is as old as VAT itself.

As early as 1968, the news magazine "Der Spiegel" wrote about the problems of kiosk owners at train stations: "The new system has also provided for grotesque things. Only five percent tax on food, but ten percent on 'consumption on the spot' among other things, kiosks and rest stops are in a dilemma. The cashier has no way of knowing whether the sausage will be eaten on the platform (ten percent) or on the train (five percent). "

The different sentences always lead to debates. Critics argue that the tax reduction does not relieve the consumer, but subsidizes individual industries. Proponents of the system point to social, educational, transport, cultural and other reasons why, for example, food and tickets should continue to be taxed at a lower rate.


More on the subject:

  • Tax policy (APuZ 23-25 ​​/ 2017)
  • Sales tax (The young political dictionary from hanislauland.de)
  • Sales tax (Duden Wirtschaft from A to Z)
  • Our tax system (information on political education 288/2012)
  • Constanze Hacke: The tithe - a journey through tax history (IzpB 288/2012)