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Germany will reduce the sales tax on gas to ease the financial pressure on consumers who will be paying a gas levy from October as Europe's biggest economy looks to avoid a wave of bankruptcies at its energy companies.
Germany has recently announced it would impose a gas levy on consumers from October 1 through March 2024 as it aims to help energy providers and importers of natural gas, which are struggling with low Russian gas supply and very expensive alternatives to Russian gas.
The new natural gas tax designed to keep importers afloat during the energy crisis prompted by Russia's invasion of Ukraine is set to cost German families, who will have to foot the bill for the tax, an extra $500 a year. Starting on October 1 and running through April 2024, the new natural gas tax aims to help German utilities, most notably Uniper, recoup costs related to replacing supplies from Russia. The new tax has forced Berlin to examine ways to assist some German families financially, with German Chancellor Olaf Scholz tweeting on Monday that steps would be taken to ensure that poorer families are not overwhelmed.
The sales gas on tax will be lowered to 7% for as long as the gas levy applies, Scholz said on Thursday.
Germany has sought—unsuccessfully—from the European Commission an exemption of the new gas levy from value added tax (VAT). So, the next best solution, for now, is lowering the sales tax on gas until the levy is in force—through the end of the winter of 2023/2024.
Russia's gas supplies to Germany have been significantly curtailed in recent months, with local importers forced to pay higher costs for alternative sources.
Germany braces for a difficult winter with low and highly uncertain volumes of Russian supply and sky-high gas and electricity prices, which could sink industries.
Despite faster storage builds than usual, Germany will only have enough gas to cover two and a half months of consumption this winter if Russia completely suspends deliveries, Klaus Müller, the president of Germany's energy regulator, told Bloomberg earlier this week.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.