German Economy Minister Backs Temporary VAT Cut on Fuel
Germany's economy minister has called for a temporary cut in fuel VAT from 19% to 7%, as the government grapples with record pump prices ahead of a state election.
German Economy Minister Katherina Reiche has said it would make sense to temporarily lower value-added tax on fuel from 19% to 7%, as the government looks for ways to ease the pressure of high prices on consumers.
Speaking on the sidelines of a G20 energy ministers' meeting in Houston, Texas, Reiche argued that a tax reduction would deliver relief where it is most visible. "It could address the burden where it is felt directly: at the petrol pump and it would take effect immediately upon introduction," she said.
The proposal comes as Chancellor Friedrich Merz's government confronts record-high fuel prices. A state election is due at the weekend, and its outcome could intensify pressure on the chancellor to step down.
Reiche drew a line against other possible interventions. She said capping fuel prices would be the wrong approach, and she also came out against imposing a windfall tax on energy companies.
The minister's remarks set out a temporary tax measure as the preferred route, rather than market controls or additional levies on energy firms, as the coalition seeks to respond to voter concern over the cost of filling up.