Debate about measures against high fuel prices: Union rejects excess profits tax

Union parliamentary group leader Thorsten Frei (CDU) thinks little of an excess profits tax for oil companies, as the SPD is calling for. Frei said in the “Early Start” program on RTL and n-tv that he shared the finding that the oil companies were making good money from the crisis. However, it doesn't matter what you want, but what measures you can take to quickly relieve the burden. "If you have an instrument that doesn't work, then it's not a suitable one." When asked whether the tax would not come with the Union, Frei said: "I don't see that at the moment."

On the one hand, the companies tend to earn their money outside of Germany, said the CDU politician. On the other hand, it is unclear what exactly constitutes excess profit and what assessment basis is used. The excess profits tax from 2022 has been stopped and there are still legal proceedings about it to this day, said Frei. "Well, it doesn't seem to me like an option that works well, safely or quickly."

He believes it is possible to reduce the VAT on petrol and diesel. Alternatively, a new edition of the fuel discount could also be considered. The state benefits from the rising crude oil and sales prices because there is a higher VAT on top of that, said Frei. “Giving something back and only charging 7 percent VAT instead of 19 would be an obvious measure.”

The demands of his party colleague Dennis Radtke, who is chairman of the CDU employee wing CDA, go much further. In view of the rapidly rising fuel prices, Radtke spoke out in favor of direct payments to financially weak households. “Direct payments to people with small and medium incomes are the right thing to do if they come quickly and unbureaucratically,” Radtke told the newspapers of the Funke media group.

The proposal is in line with the ideas of consumer advocates, who also propose targeted help for needy households instead of a new fuel discount. And even more: “Consumers have been suffering from high prices in various areas of life for several months now,” said the head of the Federal Association of Consumer Organizations (vzbv), Ramona Pop, to the “Neue Osnabrücker Zeitung”. “A sole focus on easing fuel prices should not be the answer to this.”

What is needed is “relief for people who can hardly cope with the high energy costs,” said Pop. In addition, the federal government must take a long-term and comprehensive look at the development of the cost of living.

Focus on needy households

On Tuesday, Chancellor Friedrich Merz announced government measures against high fuel prices. For many people who need a car every day, a load limit has been reached, said the CDU chairman at the Entrepreneur Day of the BGA trade association in Berlin. However, the exact instruments have not yet been determined.

Economics Minister Katherina Reiche (CDU) had previously suggested targeted relief for certain population groups via a direct payment mechanism. In Radtke's opinion, however, that is not enough. The state should not just pay the bill presented to it by the oil companies. "If the prices at the pumps move significantly faster than the procurement costs, it must be clarified who is making what profits from the crisis."

According to Radtke, it would be difficult to explain to people if the state spent billions on relief and at the same time "corporations' profits were bubbling up." Targeted aid, stricter control of price formation and participation of the crisis winners therefore belong together. "In the end, the taxpayer shouldn't be allowed to finance the relief while the oil companies increase their margins."

Relief immediately

The Greens consider an energy flat rate of 250 euros per capita to be the right way, as the Germany editorial network quotes from an action plan by party leader Franziska Brantner, the energy policy spokesman for the parliamentary group, Michael Kellner, and the top candidate in the state elections in Mecklenburg-Western Pomerania, Claudia Müller. On the question of financing, it says that the energy flat rate should be paid from the excessive billions in profits of the “fossil companies”.

Green party co-leader Katharina Dröge believes an immediate reduction in electricity tax and an excess profits tax for oil companies would be better. "It's high time for an excess profits tax for oil companies." The income would have to reach people directly through so-called energy money. However, relief should not only reach people in weeks or months: "That's why we are calling for a reduction in electricity taxes now."

Freight forwarders in Germany, on the other hand, have a price cap based on the model in Luxembourg or Belgium. Dirk Engelhardt, spokesman for the board of the Federal Association of Road Haulage and Logistics (BGL), also advocated in the “Augsburger Allgemeine” for a cheaper transport diesel model based on neighboring European countries. “This not only helps our companies, but also protects consumers from excessive price increases because all goods have to be transported,” said Engelhardt, explaining the demand.

Freight forwarders in distress

According to the industry representative, freight forwarders are currently shutting down trucks to a noticeable extent due to the high expenditure on diesel. “Up to 20 percent of the capacity will be taken out of the market,” said Engelhardt. "Fuel prices are rising so much that companies can't pass all of this on to customers."

According to the report, the German Chamber of Commerce and Industry (DIHK) considers another way to be more suitable to provide companies and consumers with relief against high fuel costs. “In view of this, the federal government should consider reducing energy taxes to the European minimum,” said DIHK foreign trade head Volker Treier to the “Augsburger Allgemeine”. He warned that the jump in energy prices threatens to place a significant burden on the German economy.

“The import bill could increase by up to 40 billion euros,” said Treier. "That would be almost one percent of Germany's gross domestic product and poison for the urgently needed economic recovery."

The then federal government had already introduced a temporary excess profits tax in 2022. The background was Russia's attack on Ukraine and the resulting rise in energy prices. In the same year, the federal government at the time introduced an electricity price cap, whereby part of the electricity consumption was offered at a fixed, cheaper price. To help finance the price cap, some of the surplus revenue generated at the time was skimmed off by electricity producers. As part of this measure, the state received over 900 million euros, as the “Rheinische Post” quoted the Federal Network Agency. “There are currently a few more levy proceedings pending, so it cannot be ruled out that the billion dollar limit will be exceeded,” it continued.