Chancellor Olaf Scholz said Thursday Germany would temporarily reduce sales tax on gas to help consumers who are facing soaring bills amid Russia’s energy supply crisis.
Scholz said the reduction in VAT on gas from the current 19 percent to seven percent is intended to compensate for an energy surcharge after the Ukraine war that is expected to cost households hundreds of euros.
“The reduced sales tax will apply as long as the gas surcharge is in effect, that is, until March 31, 2024,” he told reporters.
“With this measure, we are offering gas customers significantly greater relief than the additional burden of the surcharges.”
Scholz said the government expects energy companies to “pass this reduction in full on to consumers” while pledging further government relief measures “to ease the pressure” on households.
“The question of social justice is crucial for the country to remain united in this crisis,” said Scholz.
The surcharge was set at 2.419 cents per kilowatt hour, Trading Hub Europe, a non-profit company for energy network operators in Germany, announced on Monday.
For a family of four using an average annual energy consumption of 20,000 kWh, that would be around 483.80 euros ($491.85) before goods and services taxes.
The surcharge is intended to share rising costs for energy importers after Russia drastically cut gas supplies to Germany after invading Ukraine.
Gas importers have so far absorbed the additional costs themselves, but a new rule passed by the government allows them to pass on the inflated costs to households via the October 1 levy.
Scholz has tried to reassure Germans that they will receive state aid to cushion the additional costs, repeatedly emphasizing: “You’ll never walk alone.”
The centre-left coalition has raised fears that rising bills could spark social unrest in Europe’s elite economy.
Far-right and left-wing parties have announced street protests starting in September demanding relief for German consumers.
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