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Germany lowers natural gas tax to ease consumer burden

BERLIN– Germany will temporarily cut taxes on natural gas to ease pressure on people struggling with soaring energy costs fueled by Russia’s war on Ukraine, German Chancellor Olaf Scholz said Thursday.

The announcement at a hastily called press conference in Berlin comes a day after Scholz encountered hostile protests at a town hall event outside the capital.

Scholz said his government has decided to lower the value added tax on gas from 19% to 7% until the end of March 2024.

“Rising gas prices are a heavy burden for many citizens,” Scholz said, adding that further measures would be announced in the coming weeks.

In addition to higher wholesale natural gas prices caused by the Russian invasion of Ukraine earlier this year, German consumers will have to pay a new surcharge to support energy companies struggling to find new supplies on the world market.

Russia has cut flows of natural gas – used to generate electricity, run factories and heat homes in winter – to Germany and other European countries, and there are fears of further cuts as the weather is getting colder and demand is increasing. The resulting high prices fuel inflation, erode people’s purchasing power and increase the possibility of a recession.

Scholz said the reduction in the tax on gas purchases in general would more than offset the new surcharges, which effectively means they will be paid for out of government coffers. The German leader said the issue was a matter of “justice…to ensure the country remains united during this crisis”.

Scholz was confronted with angry chants from protesters on Wednesday evening at an event at the town hall in Neuruppin, 50 kilometers (31 miles) northwest of the capital. Videos showed several hundred people standing outside the security fence surrounding the event, some shouting “Traitor!” and “Beat it!”

German news agency dpa reported that the protesters were organized by the far-right Alternative for Germany and the Left Party.

Experts, however, questioned whether the tax cut was the right measure, given that the German government is also trying to get people to use less petrol.

“Gas is currently very scarce, which is why gas prices are high,” said Stefan Kooths of the Kiel Institute for World Economy. “In such a situation, it is not appropriate to dampen price signals through state intervention in tax rules.

Kooths said it would have been better for the German government to tax gasoline in full and use the revenue to help those hit hardest by rising energy prices.


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