KShortly before the cabinet decision on the beautified federal budget for 2022 and the medium-term financial plan, the liberal federal finance minister surprises with another expensive change of position. Within hours, Christian Lindner discovered his heart for drivers shocked by fuel prices. If he had ruled out the reduction in VAT on energy demanded by the Union with good reasons until Sunday morning, Lindner for his part held out the prospect of a large discount campaign at the gas station on Sunday evening. What isn’t technically a tax cut looks like one in fact. Financially, the discount push is almost as risky as the criticized VAT, its distribution and incentive effect could be even more problematic.
Lindner and the FDP celebrate the advance. A rebate is easier to reconcile with EU law, is higher and reaches drivers safely and quickly, while it is uncertain whether a VAT reduction will be passed on to consumers. However, the claimed benefits depend in part on the design of the discount. And they do not outweigh the biggest disadvantage that the tank discount shares with a VAT reduction on energy: In both cases, the relief is very expensive and not targeted enough. It helps the needy and the wealthy, commuters and day trippers.
According to Ifo President Fuest, a reduction in VAT to 7 percent will cost the tax authorities 9 billion euros a year and lower the price of petrol by 10 cents. For a tank discount of this amount, Linder estimates more than half a billion euros per month. That would be a little cheaper, but could – unlike a reduction in VAT – remain fully dependent on the federal government. That makes Lindner’s promise to comply with the debt brake in the coming year even more implausible.
State aid that is prone to be taken with you
How high the discount should be and whether it will be granted as a fixed cent value or as a percentage of the current diesel or petrol price, Lindner is keeping open. But it should be more than 10 cents. At first there was even talk of stabilizing fuel prices at 2 euros. Such an arbitrarily chosen pain threshold could quickly put the federal government under pressure. Currently, she would have to add between 20 and 30 cents per liter, the Union is already demanding a 40 cent discount. What prevents the gas station attendant from raising prices even higher in anticipation of government relief for his customers? The discount is not unbureaucratic. He also arouses desires, the call for discounted groceries will become louder.
At the same time, a relief for all motorists thwarts climate protection, which the SPD, Greens and FDP want to subsidize with 200 billion euros. In the short term, the traffic light would again promote behavior that she wants to change with a lot of money. Therefore, the Green Economics Minister Robert Habeck hits the second major weakness in Lindner’s concept: Like a reduction in VAT, the discount reduces the incentive to do without petrol and diesel.
Of course, the traffic light government must provide support where the energy price shock triggered by the Russian invasion of Ukraine leads to intolerable social or economic disadvantages. The coalition has launched some targeted aid, such as higher housing allowances and higher commuter allowances. More is conceivable, hardship and credit funds for companies are in the works. These approaches protect the financial reserves of the state and the climate. They focus on the solution potential of a market economy. They expect and trust the people and companies in Germany to develop private adaptation strategies in dealing with the high prices for fossil energy and also to use private savings before the state steps in. This is possible for many, as indicated by the savings rate, which increased to 15 percent in 2021.
If the government, including the FDP finance minister, seems to prematurely change the course of financial caution in favor of state aid for everyone that is prone to be taken with you, you have to ask about the calculus. Is it selfish to get a better starting position for the three state elections? That would be a grave mistake. Or is the coalition preparing the citizens for the horror scenario that Russian energy flows to Germany will dry up faster than expected – be it because President Putin stops the flow or the traffic light gives up its resistance to an embargo. That would be a good but very disturbing reason for Lindner’s hasty discount campaign. Traffic lights shouldn’t leave citizens in the dark here.