German government to raise VAT on food in restaurants back to 19% next year

FILE PHOTO: People hold a patio umbrella in a strong wind outside a restaurant in Berlin

BERLIN (Reuters) - The German government coalition is likely to raise VAT on food in restaurants back to 19% from 7%, after reducing it during the energy crisis and COVID-19 pandemic, two sources told Reuters on Thursday.

The final decision will be made later in the evening, one source added, as negotiations continued into the night over the coalition's draft budget to be reviewed in the German parliament this week.

The budget will be passed at the start of December to take effect from the start of 2024.

The newspaper Bild initially reported that the coalition would not extend the reduction in VAT.

The coalition government will also row back on planned cuts to parental allowance for higher earners, Social Democrat MP Felix Döring said.

The cabinet had approved a draft budget last July to halve the income limit for couples eligible to receive parental leave compensation to 150,000 euros, from 300,000 euros previously.

However, in negotiations on Thursday, the government agreed the limit would instead fall to 200,000 euros from April 1, 2024, and to 175,000 euros from April 1, 2025.

(Reporting by Holger Hansen, Writing by Victoria Waldersee; Editing by Toby Chopra)