The German government will temporarily lower the value-added tax on gas to seven percent. Economists believe this is a mistake. They say the measure is not only expensive, it also reduces the incentive to save energy. An overview.
The president of the German Institute for Economic Research, Fratzscher, said that the measure would mean aid based on the watering-can principle. He said it was not clear why the government was imposing a gas levy in order to then provide relief with another measure. This would only create additional bureaucracy. Instead, there must be targeted relief for low- and middle-income households.
Südekum: Incentives to save will be reduced
The scientist Südekum from the Scientific Advisory Council of the Federal Ministry of Economics expects that the incentives to save gas will be reduced by lowering the VAT. So exactly the opposite of what is actually just necessary will be achieved, Südekum said.
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Economist Grimm also thinks the tax cut is the wrong move. Compared with the expected price increases, it is a drop in the bucket, she told the Handelsblatt. What is needed, she said, is to ease the burden on the middle classes. The only thing missing now was revenue from the value-added tax, which could help finance it.
Inflation will be dampened
The Hans Böckler Foundation assumes that the step could noticeably dampen inflation over the winter. The scientific director of the Hans Böckler Foundation’s Macroeconomic and Business Cycle Research Institute, Dullien, said inflation could be about 0.7 percentage points lower in the last three months of the year. For consumers, he said, the reduced tax rate will offset about two-thirds of the additional burden from the gas levy.
Scholz appeals to companies to pass on
Chancellor Scholz had announced that the value-added tax on all gas consumption would be reduced for a limited period until the end of March 2024. It will then be seven percent instead of 19 percent. The background to this is the gas levy for consumers, which takes effect in October and also applies until the end of March 2024. Federal Economics Minister Habeck welcomed the decision. He said the measure could be implemented quickly and compensated for the costs of higher levies. He expects companies to pass the tax savings on to consumers one-to-one. Similar appeals had been made for the fuel rebate. In addition to the tax cut, Scholz and Habeck also held out the prospect of another relief package.
