Germany to Approve Fuel Tax Cut as Cabinet Meets Monday
Germany's cabinet is set to approve a fuel tax cut on Monday, with the €0.17-per-litre relief taking effect October 1 at a cost of about €2.5 billion.
The German government is expected to sign off on a planned fuel price discount at its cabinet meeting on Monday, with the measure set to take effect on October 1, a finance ministry spokesperson said.
The draft legislation was finalised over the weekend and is due to be passed by both chambers of parliament later this week.
Under the plan, taxes on gasoline and diesel will be reduced by €0.17 per litre. The rebate is projected to cost the federal and state governments a combined total of roughly €2.5 billion.
The finance ministry has said the aim is to recover the cost through a tax on excess profits booked by energy companies. The proposal has exposed divisions within the governing coalition: Finance Minister Lars Klingbeil of the Social Democrats has repeatedly backed a windfall tax, while Economy Minister Katherina Reiche and Chancellor Friedrich Merz of the conservative CDU have opposed it.
The issue was also discussed at a meeting of European Union finance ministers on Friday, where participants weighed an EU-wide windfall levy on energy companies profiting from elevated oil and gas prices. Further talks are expected in October.
The timing of the measure follows regional elections on Sunday in Berlin and in the northeastern state of Mecklenburg-Western Pomerania, where Merz's conservative party recorded its worst regional defeat in postwar Germany. The government had faced pressure to act quickly.
The relief package marks a second round of support. In April, Germany approved a tax-free bonus of up to €1,000 for workers along with a fuel discount for May and June. That earlier fuel relief cost €1.6 billion, and inflation eased during the two months it was in force. However, inflation picked up again in July after the rebate lapsed, with energy inflation climbing to 8.3% from 3.4% a month earlier.
Oil futures have risen back above $100 a barrel, roughly 50% higher than before the Iran war, as escalating attacks across the Middle East threaten additional supply routes. Derivatives markets indicate traders do not anticipate a near-term decline in prices. With the conflict showing no sign of easing, Berlin has come under pressure to introduce further relief for consumers and businesses and to contain public discontent and support for the far-right.