Germany cuts sales tax on gas to ease burden from soaring costs

GERMANY will temporarily cut sales tax on natural gas to 7 per cent from 19 per cent to try to ease the burden on households and companies suffering due to surging energy costs and hit by a new levy set to take effect in October.

Chancellor Olaf Scholz announced the move on Thursday (Aug 18) in a brief statement to reporters in Berlin. He said the government expects suppliers to pass the VAT reduction, which will apply from Oct 1, fully on to consumers and that the measure would expire at the end of March 2024.

“With this step, we are reducing the burden for gas customers overall much more than the burden created by the gas levy,” Scholz said. “This reduced VAT rate will apply as long as the gas levy is collected.”

The government is imposing the levy on gas consumers to help fund compensation for importers forced to pay higher prices and stop them from going bust, potentially triggering wider disruption in energy supplies to Europe’s biggest economy.

Due to take effect from Oct 1 and expire at the end of March 2024, the levy was set this week at 2.4 euro cents per kilowatt hour. It will boost energy bills for both corporate customers that use gas in production processes and for households already suffering from soaring heating and food costs.

The income from the new charge will be used to offset additional costs incurred by gas importers, 12 of which have already applied for compensation of about 34 billion euros (S$47.8 billion), according to the economy ministry.

Uniper, which on Wednesday reported a loss of more than 12 billion euros for the first half, accounts for more than 50 per cent of the total, according to chief executive officer Klaus-Dieter Maubach. BLOOMBERG