German government should postpone gas VAT increase, says senior Social Democrat

The vice president of the parliamentary group of the Social Democrats (SPD), part of Germany's ruling coalition, has spoken out against government plans to increase the value-added tax (VAT) on natural gas from January 2024. The tax was temporarily lowered in 2022 to counter gas price hikes related to Russia's war on Ukraine. "Back from 7 to 19 percent VAT on gas in the middle of the heating season poses a major problem," Matthias Miersch told newspaper Neue Osnabrücker Zeitung. The government plans to reverse the temporary price reduction by the end of the year, three months earlier than planned. "We should keep the lower VAT rate for heat until the planned expiry of the energy price brakes, meaning until April next year," Miersch said. He added that the cushioning of energy prices prevented "massive upheavals in society" last winter, and the same strategy should succeed this winter. "I'm not the only one who believes this, but I'm sure large parts of the parliamentary group do too."

The government capped electricity and gas prices under the energy "price brakes" and cut the VAT for natural gas last year as a response to the energy crisis and in a bid to protect consumers from skyrocketing costs. The "price brakes" are set to run out at the end of 2023, but the government is in talks with the EU to extend them until the end of the heating season in April as an "insurance against rising prices." At the end of September, the finance ministry (BMF) said the natural gas VAT reduction was planned as a short-term relief measure, pointing out that prices had recently fallen faster than expected.