Olaf Scholz believes that the VAT reduction on gas will give German consumers a break
The reduction largely balances the supplementary rate dictated to compensate suppliers for high prices
Germany significantly lowers gas taxes to deal with the sharp rise in its prices and the energy crisis due to supply difficulties in the country. The Federal Chancellor, Olaf Scholz, announced this Thursday in a brief personal speech before the cameras a reduction in VAT for natural gas from the current 19% to 7%. With this measure, consumers will be more discharged than taxed by the state rate dictated this week and which will come into force in October to compensate for the rise in the price of that energy good as a result of the war in Ukraine. Scholz stressed that he expects from the supply companies that this tax reduction be transferred one by one to consumers. “This is one more step to download it,” said the Social Democratic leader.
The head of the Berlin Executive also announced a new package of relief measures for the Germans due to the energy crisis in the coming weeks. Its objective is to reduce the great pressure to which many citizens and companies are subjected. “The content of that package is being discussed in a reserved manner within the Government. The question of justice is decisive for this country to remain cohesive during the crisis, “said Scholz, who reiterated the football motto “You’ll never walk alone” (you will never walk alone). The VAT reduction has its origin in the new rate for gas dictated by the federal government so that importers can transfer to consumers the rise in prices suffered by the energy crisis.
This rate contemplates a surcharge for private consumers and companies of 2.4 cents per kilowatt/hour in consumption. This rate is also taxed by VAT. Something that Scholz’s cabinet wanted to avoid so that the State did not benefit from a precarious situation. European law does not, however, contemplate the possibility of waiving this tax. The legal framework does not allow exceptions, as the Eurocommissioner for the Economy, Paolo Gentiloni, wrote to the German Finance Minister, the liberal Christian Lindner. Berlin has now chosen to apply the lower VAT rate of 7% that applies in this country for basic necessities to all gas consumption. VAT in Germany is generally 19%.
The reduction will be in force for the same time as the supplementary rate, until the end of March 2024. Half of German homes have gas-powered heating. According to official calculations, a single-person household consumes 5,000 kilowatt hours per year. The supplementary rate supposes an increase of the annual costs of 121 euros without counting the VAT. For a family of four people and a consumption of 20,000 kilowatts/hour per year, the added cost for the compensatory rate is around 484 euros without VAT.