Business & Economy

Germany cuts tax on gas prices to cushion domestic economy

Berlin, Aug 18 (EFE).- The German government has announced it will temporarily lower the sales tax on gas from 19% to 7% as prices continue to soar and squeeze domestic spending, chancellor Olaf Scholz said Thursday.

The measure will come into force from October 1 until the end of March 2024 after a levy was slapped on energy firms that they could then transfer to customers.

“With this step, we are unburdening customers much more on balance than the burden that the gas levy will create,” Scholz said.

The chancellor added that in the coming weeks the government would be sharing details of the third package of relief measures for citizens at a cost of 30 billion euros.

The move comes after the German government introduced a levy to help energy companies cover the cost of procuring non-Russian gas.

The government has allowed energy firms to transfer the additional costs to consumers arguing that if not they could face insolvency.

Trading Hub Europe, Germany’s gas market operator, announced it had set the levy at 2.419 cents per kilowatt hour (kwh).

The reduced tax rate announced on Thursday will be in place as long as the levy on customers is charged.

Another levy was also announced on Wednesday by the gas market operator to boost gas stocks and was set at 0.59 euro cents per megawatt-hour (MWh).

German media have been speculating that the measures mean families with several members will face a rise in energy costs of over 500 euros a year.

Berlin asked the European Commission for permission to waive VAT collection on the levies, but the request was turned down.

Scholz had already announced his government would seek an alternative to avoid burdening consumers who are already feeling the pinch with price increases as the cost of living in Europe continues to soar.

The reduced supply of Russian gas through the Nord Stream 1 pipeline has forced German importers to locate alternative suppliers at much higher prices than initially expected. EFE


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