Economics Minister Reiche proposes reducing the VAT on fuel

The Minister of Economic Affairs wants to reduce the tax burden on fuel, and further help is conceivable for companies. However, she doesn't think much of the coalition partner's proposals.

Economics Minister Katherina Reiche: New relief proposal. Photo: IMAGO/Andreas Gora

Berlin. Federal Economics Minister Katherina Reiche (CDU) has proposed reducing VAT on petrol and diesel. That would mean relief “directly at the pump,” said Reiche after a meeting of the G20 energy ministers in the USA. She advocated a reduction from 19 to seven percent.

As a result of the ongoing fighting in the Middle East and the associated problems with oil supplies, fuel prices in Germany have risen significantly. Chancellor Friedrich Merz (CDU) announced state relief on Tuesday, but left its exact form unclear.

Reiche had previously spoken out against renewed state intervention. She was already critical of the reduction in energy taxes on fuel that the federal government implemented for two months in early summer. The measure was also called the “tank discount”.

Comment

The fuel discount and the real satire with the account numbers

Julian Olk

Reiche now said that the high fuel prices would affect citizens and logistics companies on a daily basis. She knows about these worries. Union parliamentary group leader Thorsten Frei (CDU) had previously proposed reducing sales tax on fuel. It is becoming apparent that the Union in the federal government is committed to this measure.

Relief adjusts automatically

The key difference between a reduction in sales tax and a further reduction in energy tax lies in the respective effect. The energy tax is a fixed amount of cents per liter. The relief effect is the same for every liter.

The sales tax, on the other hand, is calculated as a percentage surcharge on the fuel bill. The higher this is, the higher the prices rise, the greater the relief. When it comes to sales tax, the relief automatically adapts to price developments. However, there is no difference between the two measures despite criticism from many economists that they distort price signals and that drivers reduce their consumption less.

Reliefs

High fuel prices: Frei proposes reducing VAT

There is a relevant difference for the economy. Most companies pay the energy tax in full, but get the sales tax refunded. A reduction would not help them. Associations had therefore already criticized the measure as inadequate.

The Economics Minister took up this criticism and announced that “further ways” to provide relief for logistics companies would be examined.

Against the fuel price cap

Reiche also reiterated that she considers direct payments to drivers to be the best way to provide relief. However, the “direct payment mechanism” that connects the state treasury with citizens’ accounts is still not available. Reiche said that the mechanism would “hopefully be operational by the beginning of next year.”

Related topics

Katherina ReicheCDUSPDTaxesGermany

It is now unclear how the SPD will react to the CDU's proposals. So far, the Social Democrats have not heard anything about a reduction in sales tax. Instead, Finance Minister Lars Klingbeil (SPD) continues to promote a variable fuel price cap, financed by an excess profit tax for the oil companies.

The Chancellor had already viewed these ideas with skepticism, but Reiche now became even clearer. She warned against the price cap because it would weaken “our medium-sized refining industry”. Their concern is that the production of fuel will no longer be profitable if there is a price cap. And an excess profits tax would bring “significant legal uncertainty”.

More: Crunch in the cabinet: Merz quoted Reiche to talk about leadership style

Published according to the editorial standards of the Handelsblatt. You can find more information in our guidelines.

More on the topic of our partners display

remind.me Take advantage of current low electricity/gas prices before prices rise again