German Chancellor Olaf Scholz gives a statement to comment on a planned gas levy, on August 18, 2022 at the Chancellery in Berlin. - Russia's war in Ukraine has caused turmoil in European energy markets, especially in Germany, which is heavily dependent on Russian gas. (Photo by Odd ANDERSEN / AFP)

Value-added tax on natural gas is to be reduced from 19 to seven percent. The reduction should apply until March 2024. Chancellor Olaf Scholz (SPD) announced this in a press conference called at short notice.

With the step, gas customers would be relieved significantly more overall than they would be burdened by the state gas surcharge, says Scholz. However, that depends on how much customers pay for their gas.

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He expects companies to pass the tax cut on to consumers one-to-one, said the SPD politician. “This is another step towards relief.”

The background is the gas surcharge, which importers can use from October to pass on increased procurement costs to consumers due to the Ukraine war. All gas users will then have to pay, whether private individuals or companies – initially around 2.4 cents per kilowatt hour. Value added tax also applies to the levy.

The federal government actually wanted to prevent this and thus ensure that the state did not earn money. According to European law, however, there is no provision for waiving VAT.

The legal framework allows for no exceptions, wrote EU Economic Commissioner Paolo Gentiloni in a letter to Finance Minister Christian Lindner. However, the federal government has the option of reducing the applicable VAT to the EU minimum rate of five percent.

A first sample calculation by the comparison portal “Check24” assumes possible savings of 375 euros for a model household with an annual consumption of 20,000 kilowatt hours. Instead of 3717 euros, this model household would then pay 3342 euros.

From October, however, this household will have to pay 518 euros more due to the gas levy of 2.419 cents per kilowatt hour. At 19 percent, 576 euros would be due. The reduction in VAT only partially compensates for the additional costs caused by the levy for this model household.

In addition – depending on the supplier – there can be more than 100 euros for the costs of the so-called control energy.