German Finance Minister writes to Brussels about VAT exemption for gas tax

Finance Minister Christian Lindner attends a news conference to present key points of planned legislation to offset high inflation in Berlin, Germany August 10, 2022. REUTERS/Lisi Niesner

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BERLIN, Aug 14 (Reuters) – German Finance Minister Christian Lindner has written to the European Commission asking for permission to waive value added tax on a new gas price tax for a limited period , revealed a copy of his letter seen by Reuters. Sunday. Read more

The German gas market operator is due to announce on Monday the amount of the tax that Berlin is imposing on all gas consumers to spread the additional cost of gas imports.

The tax is intended to help Uniper (UN01.DE) and other importers cope with soaring prices due to reduced Russian export flows, but it would add to already high energy prices and inflationary pressures for customers.

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Under EU legislation regarding VAT on energy products, the tax is considered part of the overall gas price, which means it is mandatory, which is why Germany must ask Brussels permission to waive it.

Lindner said that while he was asking on behalf of Germany, he was actually asking for a change to the VAT law that would give all member states the temporary option to take similar action.

Lindner’s English letter, dated August 12, said Germany would officially apply for the EC later, but he wanted to appeal to Brussels first to persuade the authorities that policymakers were concerned about possible difficulties and resentments.

“VAT on government-imposed levies is driving up prices and facing increasing opposition from the public, especially in the current exceptional situation,” he said.

“However, public acceptance of tax laws is crucial for their enforceability,” he said.

Since mid-June, Russia has drastically reduced flows to Europe via the Nord Stream 1 gas pipeline and is currently supplying only 20% of agreed volumes, blaming faulty and delayed equipment, while Europe says the move was politically motivated.

Utilities – wedged between importers and rushed end consumers – fear they will be stuck with grueling costs.

“Rising energy prices are a threat to our prosperity and stability,” Lindner said.

So far, the government expects a levy of between 1.5 and 5.0 euro cents per kilowatt hour (kWh) on consumers to pay 90% of the higher cost of wholesale gas, plus a yet unspecified levy for gas storage to be released August 18.

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Reporting by Christian Kraemer, writing by Vera Eckert, editing by Hugh Lawson

Our standards: The Thomson Reuters Trust Principles.

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