Germany to lower gas VAT to 7% to help consumers, Scholz announces

German Chancellor Olaf Scholz, August 18, 2022 in Berlin (AFP / Odd ANDERSEN)

The German government has decided to temporarily lower the VAT on gas, from 19% to 7%, to help consumers in the face of soaring prices triggered by the war in Ukraine, Chancellor Olaf Scholz announced on Thursday.

The reduced rate will remain in place until at least the end of March 2024 and “we expect businesses to pass this cut 100% on to customers,” Scholz added.

The rise in prices “is a major burden for many people”, admitted the head of government in a brief statement to the press.

While prices are already rising rapidly, bills will still increase significantly from October 1, when gas distributors will be able – thanks to a new law – to pass on the increase in purchase prices to customers.

Companies will be able to request an additional exceptional levy of 2.4 centimes per kilowatt hour (KWh) of gas from individuals and companies.

VAT included, this represents some 600 euros more per year for an average household with two children and a consumption of 20,000 KWh.

The coalition government sought to completely exempt this levy from VAT, a measure refused by the European Commission.

Berlin has therefore decided to lower the tax on all consumption, which “relieves consumers more” than what the exceptional levy costs, assured Mr. Scholz.

The Chancellor also reiterated the promise of a new aid package “to ease the pressure on individuals and businesses”.

The details of the measures are currently the subject of negotiations within the coalition.

Germany has already put in place aid totaling 30 billion euros, including discounts at the pump or the popular 9-euro ticket, which allows travel on public transport and regional trains. for a month. However, the measure stops at the end of August.

© 2022 AFP

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