Is a Germany VAT increase to 21% confirmed?

No. It is a policy risk flagged by Marcel Fratzscher of DIW, not a confirmed law. Lawmakers would need to propose, debate, and pass changes, with a lead time before implementation. Investors should track official announcements and the budget process for concrete timelines and details.

How much would prices rise from 19% to 21% VAT?

If businesses hold net prices constant and pass on the full change, gross prices for VAT-able items would rise about 1.68% because the multiplier moves from 1.19 to 1.21. Actual outcomes can vary by sector, competition, contracts, and whether reduced-rate items are affected.

Which sectors are most exposed if VAT increases?

Retailers, e-commerce, restaurants, autos, leisure, and other discretionary services are most exposed as consumers trade down. Domestic small caps tied to local demand can lag. Export-heavy industrials and consumer staples may prove more resilient due to steadier demand or foreign revenues that offset home-market weakness.

What can investors in Germany do now?

Assess portfolio exposure to domestic consumption, stress-test for slower volumes, and favor firms with pricing power, cost control, and solid balance sheets. Consider a tilt toward defensives and selective exporters. Use staggered entries to manage volatility while waiting for official policy details and updated company guidance.

Global Market Insights

Germany VAT Hike Talk on February 18: DIW Flags 21% Policy Risk

ByDanny Kontos February 18, 2026February 18, 2026

Germany VAT increase talk moved to the forefront on February 18 after DIW chief Marcel Fratzscher warned a shift from 19% to 21% is possible. This comes amid a weak German growth outlook, tight budgets, and demographic strain. A higher VAT would lift near-term inflation and could cool household spending. We explain the policy backdrop, sector impacts, and practical steps for portfolios. Our aim is to help retail investors in Germany balance risks and opportunities if the tax path changes.