Germany decided on June 3 to reduce the value-added tax (VAT) rate on non-food products to 16 percent from 19 percent, starting from July 1 and through the balance of this year, to give a boost to consumption and the economy. It has also cut the VAT rate for restaurants from 19 to 7 percent. The lower sales tax may encourage customers in neighboring countries to do some of their shopping in Germany. The VAT rate in France is 20 percent. The Swiss already started to indulge in cross-border shopping after the appreciation of their currency, although VAT rates are lower in their country. Danish retailers are worried that the German government’s move will hit their already weakened business further. Denmark charges a flat rate of 25 percent on almost everything including food, clothing, restaurants etc. Together with Norway and Sweden, Denmark has the highest sales tax among the OECD countries except for Hungary, where it stands at 27 percent.
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