FILE PHOTO: Pipes at the landfall facilities of the Nord Stream 1 gas pipeline are pictured in Lubmin, Germany, March 8, 2022. REUTERS/Hannibal Hanschke/File Photo

In view of the exploding energy prices, the energy industry is demanding a reduction in VAT on gas and electricity. The levy on the gas and electricity price should be reduced from 19 percent to the reduced rate of 7 percent from January 1, 2023, according to a paper by the Federal Association of Energy and Water Industries (BDEW) that the German Press Agency present. According to the paper, the reduced rate should initially apply for at least two years.

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“Rising prices for gas and electricity due to higher procurement costs are a burden for households and companies and make instruments with a price-dampening effect indispensable – in addition to direct relief for low-income households in particular,” said Kerstin Andreae, CEO.

The cancellation of the EEG surcharge has had a certain dampening effect on electricity prices since July 2022. Due to the ever-increasing procurement costs, however, further price increases are the result, which make it necessary to reduce other state-induced elements. “This applies both to the price of electricity and, in particular, to the price of gas, since, in addition to the enormously increased procurement costs, further sharply rising prices are to be expected with the gas procurement and gas storage levy,” she said.

With rising prices for electricity and gas, government revenue from VAT also increases. By reducing the tax from 19 percent to 7 percent, all households could be relieved, it said. “With a reduction in VAT, the state’s revenue would still be (slightly) above the level of revenue from a “pre-Corona year” like 2019,” said Andreae.

A cancellation or reduction of VAT on the gas levy, as sought by Finance Minister Christian Lindner (FDP), would involve a great deal of bureaucracy on the one hand and only a small relief on the other, it said.

According to the calculations of the BDEW, the gas price relief effect for a single-family house with a consumption of 20,000 kilowatt hours per year would be between 356 euros and 516 euros per year. For an apartment in an apartment building with a consumption of 13,333 kilowatt hours, it would be between 237 euros and 344 euros. According to the BDEW, if the VAT on the gas levies were abolished or reduced, the relief would be between EUR 57 and EUR 190 per year for a single-family house, EUR 38 and EUR 127 per year for an apartment.

At the same time, the BDEW appealed again to gas consumers not to let up on saving gas. “In order to get through the winter well, it is important to further reduce gas consumption and to fill up the gas storage tanks as much as possible for the rest of the summer,” says Andreae. Everyone can and must help – “from industrial companies to individual households”. In almost every household and in public buildings there are still ways to save energy.