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Price effects and pass-through of a VAT increase on restaurants in Germany: causal evidence for the first 12 months and a mega sports event

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  • Matthias Firgo

Abstract

This paper analyses the price effects and tax pass-through of a VAT increase from 7% to 19% on restaurant services in Germany as of January 1, 2024. The Synthetic Control Method (SCM) is used to identify the causal effects of this reform using prices of goods and services unaffected by the tax change as a counterfactual for restaurant prices. Immediately in January, 31% of the tax increase was passed on to consumer prices. Pass-through increased to 70% in the following months, which corresponds to a causal consumer price increase of nearly 8%. This indicates a low price elasticity of demand for gastronomy in post-pandemic Germany. The presumed increase in demand for gastronomy services due to hosting the UEFA Euro 2024 tournament did not alter the path of price adjustments.

Suggested Citation

  • Matthias Firgo, 2026. "Price effects and pass-through of a VAT increase on restaurants in Germany: causal evidence for the first 12 months and a mega sports event," Current Issues in Tourism, Taylor & Francis Journals, vol. 29(8), pages 1447-1454, April.
    • Handle: RePEc:taf:rcitxx:v:29:y:2026:i:8:p:1447-1454
    DOI: 10.1080/13683500.2025.2492384
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