The German government says the drop in the sales tax on gas will outweigh a surcharge gas companies can apply
The German government says the drop in the sales tax on gas will outweigh a surcharge gas companies can apply

Chancellor Olaf Scholz said on Thursday that Germany would temporarily slash the sales tax on gas to help consumers facing soaring bills amid a crunch in Russian energy supplies.

Scholz said the move to cut the VAT on gas to seven percent from 19 percent currently was intended to offset an energy surcharge in the wake of the Ukraine war expected to cost households hundreds of euros.

"The discounted sales tax will apply as long as the gas surcharge is being applied, that is until March 31, 2024," he told reporters.

"With this measure we are offering gas customers relief that is significantly larger than the extra burden imposed by the surcharges."

Scholz said the government expected energy companies "to pass on this reduction in full to consumers," while pledging further state relief measures "to ease the pressure" on households.

"The question of social justice is decisive so that the country remains united in this crisis," Scholz said.

Trading Hub Europe, a non-profit company of energy network operators in Germany, on Monday said the surcharge had been set at 2.419 cents per kilowatt hour.

For a family of four with an annual average energy usage of 20,000 kwh, this would come to about 483.80 euros ($491.85) before goods and services taxes.

The surcharge is aimed at sharing out the surging costs borne by energy importers after Russia drastically choked off gas supplies to Germany following its invasion of Ukraine.

Gas importers have so far swallowed the additional costs themselves, but a new rule agreed by the government allows them to pass on ballooning costs via the levy to households from October 1.

Scholz has attempted to reassure Germans that they will receive state aid to help cushion the blow of the additional costs, repeatedly intoning: "You'll never walk alone."

The centre-left-led coalition has expressed fears that the soaring bills could lead to social unrest in Europe's top economy.

Far-right and left-wing parties have announced street protests beginning in September demanding relief for German consumers.