EU commissioner for 'Economy' Paolo Gentiloni arrives for the European Commission weekly College Meeting at the EU headquarters in Brussels on May 11, 2022. (Photo by Kenzo TRIBOUILLARD / AFP)

One day after the EU Commission vetoed a gas surcharge without VAT, the federal government received another letter from Brussels: In a letter to Federal Finance Minister Christian Lindner (FDP), Economics Commissioner Paolo Gentiloni made four suggestions as to how the traffic light coalition could deal with the problem .

In his letter, Lindner had asked whether a complete exemption from VAT would be feasible. A commission spokesman said no on Tuesday.

Gentiloni suggests the German government give back the VAT revenue from the levy to “particularly vulnerable” households as a relief measure. According to the letter, transfers to the energy companies would also be possible in order to lower prices for end consumers.

According to EU law, it would also be permitted to reduce the VAT rate on natural gas to five percent – that is the EU-wide lower limit. In Germany, the reduced VAT rate is seven percent. Fourth suggestion from Brussels: According to Gentiloni, the amount of the levy could also be reduced in order to get to the sum of 2.419 cents per kilowatt hour announced on Monday despite the normal VAT of 19 percent. This figure does not include VAT.

An EU spokesman told the Tagesspiegel that the Commission was prepared to continue to help the Federal Ministry of Finance in finding the best solution. The surcharge is to be introduced on October 1st and avert insolvencies among gas importers.

Government spokesman Steffen Hebestreit said there were various options, but gave no details. Chancellor Olaf Scholz (SPD) wants the issue to be clarified quickly. All four variants mentioned by Gentiloni are already being discussed in the coalition. Accordingly, there could now be a dispute about which way the government should go. In the FDP and the Greens, there is sympathy for reducing the tax to five percent. This would also relieve companies. Among the Social Democrats, a solution is favored that amounts to a repayment of the tax on the levy to households that are particularly burdened.