German retailers ‘raising prices before VAT hike’

30 August 2006

BERLIN – German retailers are raising prices in advance of next year’s planned sales tax increase, the head of a leading German economic research institute said Wednesday.

“I think many retailers are using their experience of the euro conversion and are therefore beginning to raise prices,” said Thomas Straubhaar, head of the Hamburg Institute for World Economics (HWWI), in a Deutsche Welle radio interview.

Straubhaar said shops were hiking prices in advance of the January 1, 2007 increase of value added tax to 19 per cent from the present 16 per cent so they would not be blamed for a big overnight price in the new year.

Price increases following introduction of the euro in 2002 were widely blamed on retailers taking advantage of the single currency to gouge consumers – even though most serious studies found little evidence of such activity.

DPA

Subject: German news