VAT on energy must disappear. But as?


The EU Commissioner calls Germany back: VAT on energy must disappear. But as?

The gas surcharge is very expensive for everyone involved. In order to mitigate them somewhat, it is intended to reduce the tax for energy. But that’s easier said than done: EU tax directives prevent the government from simply suspending VAT, for example. However, there are other options.

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Starting from October, the gas fee for everyone heating with gas will be more expensive: a family of four has to calculate more than 400 euros – without VAT. If tax is added to this, as always, the model family quickly gets more than €500 a year. Since this reach into citizens’ wallets means trouble for politicians and is not compensated by any aid package, the traffic light authorities are singularly united: VAT must go.

However, this is simply necessary, but actually difficult to achieve: Because it is against a mandatory EU directive. It states: “To achieve the ‘greatest simplicity and neutrality of the VAT system’, ‘the tax must be collected as broadly as possible’ and ‘its scope must cover all stages of production and distribution, as well as services.’ German: There are no exceptions and the EU Commission spokesperson has already responded to the German request.

What’s now? Creativity is now being demanded from traffic light authorities. The bottom line is that under EU regulations the gas premium would not be inflated through state taxes. A possible headline: “The state makes billions from the gas tax” is certainly not one of the most pleasant fantasies of Berlin politicians. So alternatives are being sought. The following three options are currently available:

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1. Adhere only to the EU minimum VAT rate

Although there is a VAT on everything in the EU, there is only a minimum requirement for the amount from Brussels: It must not fall below five percent. The guardians of the EU market are no longer interested. Therefore, some politicians believe that the reduction to five percent is a good thing. “At least five percent should be used,” Green economic politician Dieter Janecek told Handelsblatt. Similar voices are coming from the SPD. “Now the tax must be reduced to at least five percent. We have to do everything to keep the tax as low as possible,” says SPD economic politician Falko Mohrs.

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2. Reduce VAT in total

Germany has a chaotic system where sometimes you have to pay 19 and sometimes seven percent VAT. At first, seven percent was allocated to things that are necessary for life. But in practice there is a lively wild growth. The most cited example is tomato paste, which is taxed at 7 percent, as opposed to tomato ketchup, which is taxed at 19 percent. If the absolute necessity principle were followed, energy prices would only have to be taxed at seven percent, which, for example, the head of the Taxpayers’ Association, Reiner Holznagel, has been demanding for electricity for several months. The significant additional costs are now also seriously debated. Hannes Walter, vice-chairman of the SPD’s Economic Committee, believes that an overall reduction in VAT is possible. This is what Jens Spahn, the vice-president of the Union faction, would like. Most recently, the black and red coalition that ruled until last year reduced VAT for six months during the pandemic.

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3. Reduce the energy bill

In principle, all energy sources are subject to an energy tax, which in turn is harmonized with the EU. The state receives 38 billion euros annually from this tax. It knows many exceptions, because renewable energy must be promoted more with its help. Abolishing the energy tax on gas would have an even greater impact than the abolition of VAT. However, it is also doubtful whether the EU will agree to this. But there is a model for this idea: behind the tank discount, which is still valid until the end of August, is a reduction in energy tax on fuel. However, it also raises the same issues as with the tank rebate: will the reduction in energy tax pass on to the consumer or…

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