The German federal government wants to demand a lower VAT rate on natural gas for a limited period until 2024. Chancellor Olaf Scholz (SPD) announced on Thursday that the tax should be reduced from the previous 19 percent to 7 percent.
Under the measure, gas customers would generally be relieved far more than they would be burdened by the state gas surcharge. Scholz expects companies to pass the one-to-one tax cut to consumers. “This is another step towards relief.”
The backdrop is the gas tax, which importers can use from October to pass on rising procurement costs to consumers due to the war in Ukraine. All gas users will then have to pay, whether individuals or companies – initially around 2.4 cents per kilowatt-hour. Value added tax is also levied on the fee.
State doesn’t want to make money
In fact, the federal government wanted to prevent this and thus ensure that the state did not make money. According to European law, however, there is no provision for exemption from VAT. The legal framework does not allow for exceptions, wrote EU economic commissioner Paolo Gentiloni in a letter to finance minister Christian Lindner. However, the federal government has the option of reducing the applicable VAT to the EU minimum rate of 5%.
The traffic light coalition of Social Democrats, Greens and Liberals (FDP) does not choose this stage. Instead, she wants to use the reduced rate of 7%. In Germany, a VAT rate of 19% generally applies. However, 7 percent applies to selected goods. The tax reduction now announced is expected to apply during the period of the gas surcharge, i.e. until the end of March 2024.
About half of all homes in the Federal Republic heat with gas. According to example calculations, the surcharge for a single-person household with an annual consumption of 5,000 kilowatt-hours means additional annual costs of around 121 euros, even without VAT. For a household with an annual consumption of 20,000 kilowatt-hours, the additional costs without VAT are around 484 euros per year.