This is how expensive schnitzel and fries could be in 2024

Gastronomy is a social anchor point for people – a place to linger. A return to the old VAT could change that.

German bars, hotels and restaurants breathe a sigh of relief: According to the Federal Statistical Office, sales increased by 2.6 percent in September compared to the previous month. Even after adjusting for prices, sales growth was still two percent. But this momentum could quickly be over again: from January 1, 2024, the VAT on food is to be increased again to 19 percent. So will eating in a restaurant become unaffordable for average earners next year?

From the perspective of the German Hotel and Restaurant Association (Dehoga), the tax increase to the standard rate of 19 percent is a “catastrophe for companies”. In his opinion, this leads to a price shock for guests. 12,000 companies are threatened with extinction, warned Dehoga President Guido Zöllick.

“We want gastronomy to remain affordable and to preserve the culinary diversity and food culture in our country.” The association is therefore calling for the reduced VAT of 7 percent to be maintained permanently.

Due to the tough cuts for the industry as a result of the pandemic, the then ruling coalition of CDU and SPD initially reduced the VAT for food in restaurants and pubs to 7 percent for one year on July 1, 2020 and then extended this regulation until the end of 2023. As a result, the Ministry of Finance lost an estimated 3.4 billion euros.

The fact that schnitzel, fries, etc. could become more expensive in 2024 is not just due to VAT. Increased personnel costs, inflation, higher energy and purchasing prices are at least as responsible for the sometimes enormous price increases. Meat for schnitzel has increased in price by 25 percent since 2019, fries by 68 percent, and the price for breadcrumbs has doubled.

The minimum wage will rise from 12 euros to 12.41 euros next year – that’s only 3.42 percent rounded, but staff is tight. Restaurateurs have to offer more than the minimum wage. Only the situation in the energy sector has eased somewhat. In total, the cost of goods for a classic schnitzel dish has increased by 33 percent.

At 73 percent, schnitzel is the Germans’ favorite dish, followed by roulades and roast. While a schnitzel with fries cost an average of 13.50 euros before the corona pandemic, today some restaurants charge 18 euros for it. If the VAT increases to 19 percent, the court would have to cost 20 euros – and this does not include the higher personnel costs.

What the upcoming tax adjustment means specifically for the prices on the menu can be seen from further examples.

• A salad that now costs 10.70 euros will soon cost 11.90 euros.
• A pasta dish that currently costs 15 euros will soon cost 16.68 euros.
• The price for a steak, for example, increases from 25 euros to 27.80 euros.

Every restaurant has higher and lower margin dishes on the menu. Between 17 and 36 percent are usual. But the higher the fixed costs of a business, the lower the earnings. The drinks are intended to compensate for the low profit margins, but that no longer works when too many dishes become unprofitable.

Economists welcome the increase in VAT from 7 to 19 percent. Friedrich Heinemann from the Center for European Economic Research (ZEW) told the Reuters news agency that the catering industry’s arguments for a permanent extension of tax subsidies were weak and contradictory. “This very expensive benefit is socially problematic because it particularly benefits the wealthy,” said Heinemann.

The chairwoman of the Advisory Council, Monika Schnitzer, was equally critical. “It’s simply not good to convey that a certain industry will now be supported so strongly in the long term by reducing VAT,” said the economic expert on Deutschlandfunk. You have to ask yourself which sectors would have permanent difficulties in the new situation and could only survive with subsidies. “There has to be a structural change,” said the economist. This must also apply to the catering industry.

The coming year will show whether the death of village inns will accelerate and whether guests would prefer to have their food delivered to their homes instead of going to the restaurant. But there is plenty of reason for optimism: after numerous rounds of wage increases, people have more money in their pockets again, inflation is on the decline and energy prices are falling.