Germany reduces VAT on gas to relieve consumers

The German government will temporarily reduce the value added tax (VAT) on natural gas from 19 to 7 percent in a bid to relieve gas customers struggling with rapidly rising prices for the fossil fuel. “Rising energy prices are a great burden for many citizens,” chancellor Olaf Scholz told journalists in Berlin. The reduced VAT would be in place alongside the controversial levy on gas aimed at supporting struggling gas importers, which was recently agreed and will be in place until March 2024 at least. “With this step, we’re creating relief for customers that is much greater than the additional burden caused by the gas levy,” Scholz said. The levy will be introduced on 1 October. Scholz said the government expected companies to pass the tax reduction in full to customers. The Social Democrat (SPD) politician said the government would also work on a third relief package for citizens and also businesses. “The question of fairness is decisive to keep our country together in this crisis,” Scholz said.

“Since a direct tax exemption is not possible under European law, a temporary reduction of VAT on gas is logical,” said economy minister Robert Habeck. Utility association BDEW called the reduction an important relief for consumers and called on the government to follow up with a corresponding tax reduction on electricity.