The German Taxpayers’ Alliance has called for VAT and other taxes on electricity in Germany to be significantly cut, to relieve consumers from rapidly-rising utility bills. 

German Taxpayers’ Alliance calls for VAT cut on electricity

In an interview with dpa, Rainer Holznagel of the Taxpayers’ Alliance said the debate about rising energy prices often overlooks the fact that the government benefits from these increases. As he explained, higher prices for electricity mean that the government collects more in taxes like VAT.

On top of this, since the beginning of last year, the government has been earning additional revenue via the CO2 tax on carbon emissions. Consumers are charged a surcharge on climate-damaging products like petrol and gas, amounting to 25 euros per tonne of CO2 released into the atmosphere. According to Holznagel, in 2021 the government’s revenue from the new tax was around 12,5 billion euros. 

He therefore urged the German government to uphold its promise to return this additional income to its citizens. One way of doing this, he suggested, would be to reduce VAT on electricity from 19 to 7 percent, and cutting the electricity tax as far as EU competition laws allow. 

Government pledges support with rising energy costs

In a bid to support households struggling with rising energy costs, the federal government has in recent weeks and months unveiled a series of proposals to help relieve consumers. Among these include a lump-sum heating subsidy for low-income households, and a proposal to scrap the EEG-surcharge on the price of electricity. 

The government has already cut the surcharge - which is added to the price of electricity in Germany to help fund renewable energy projects - by more than 40 percent, but consumer advocates argue that the effect of this has not yet been felt by bill payers, who are struggling with record-high energy costs.