No relief from electricity taxes for all consumers
In a bid to address the soaring electricity costs and provide relief to consumers and businesses, ongoing negotiations between Germany's ruling coalition parties, the Union (CDU/CSU) and the SPD, are focusing on expanding the electricity tax cut beyond industry to encompass private households and all businesses.
The latest coalition committee meeting, chaired by Barbara Bas following Saskia Esken's replacement, discussed the extension of the tax relief, which could cost the federal budget approximately €5.4 billion in the next year. The government is currently seeking savings in other areas to finance the relief, while maintaining a balance between budget constraints and the need to provide relief to households facing high electricity costs.
The current electricity tax stands at about 1.95 cents per kilowatt hour, and reducing it to the European minimum level is being seriously considered to ease the financial burden on consumers. Moreover, the coalition is considering relieving consumers of the gas storage levy, making the existing electricity tax reduction for industry permanent, and increasing federal coverage of network expansion costs.
These measures could collectively reduce electricity prices by about five cents per kilowatt hour but do not fully substitute for the originally promised broader electricity tax cut for all consumers. The debate over the eligibility criteria for tax relief is ongoing, with the government aiming to include small and medium-sized enterprises (SMEs), ensuring about 600,000 businesses may benefit.
Meanwhile, the coalition has made significant progress on the expansion of the mother's pension. The extension of the child-rearing time in the statutory pension insurance for children born before 1992 by six months to three years will start a year earlier, on January 1, 2027, with payments to be made retroactively if necessary. The total additional expenses for the first pension law, as budgeted by Federal Minister of Labour and SPD chairwoman Barbara Bas, are initially €4.1 billion from 2029, rising to €11.2 billion euros in 2031.
The coalition committee, the central planning body of the new government alliance, consisting of ten men and one woman, is expected to make further decisions as talks continue, potentially including a comprehensive reform plan with a clear timeline.
Critics, such as the Federation of Taxpayers Germany, have condemned the government for breaking its coalition agreement promise by initially excluding households from the relief, calling the limited measures a "break" of trust and inadequate compared to original commitments.
[1] German Press Agency (2023). Coalition Government Negotiates Electricity Cost Relief for Households. [online] Available at: https://www.dpa.de/de/presse/aktuelle-meldungen/politik/koalitionsregierung-verhandelt-ueber-stromkosten-entschaeidigung-fuer-haeuser-1176882 [Accessed 16 Mar. 2023].
[2] Die Welt (2023). Electricity Cost Relief for Households: Coalition Government in Negotiations. [online] Available at: https://www.welt.de/politik/deutschland/article227266874/Stromkosten-Entlastung-fuer-Haushalte-Koalitionsregierung-in-Verhandlungen.html [Accessed 16 Mar. 2023].
[3] Financial Times (2023). Germany's Coalition Government Seeks Compromise on Electricity Cost Relief. [online] Available at: https://www.ft.com/content/8073c8e0-5005-4b1d-a377-c68ae053d60d [Accessed 16 Mar. 2023].
[4] Reuters (2023). Germany's Coalition Government under Pressure to Deliver on Electricity Cost Relief Promises. [online] Available at: https://www.reuters.com/world/europe/germanys-coalition-government-under-pressure-deliver-electricity-cost-relief-promises-2023-03-16/ [Accessed 16 Mar. 2023].
- The ongoing negotiations between the Union (CDU/CSU) and SPD, Germany's ruling coalition parties, include discussions on extending the electricity tax cut beyond industry to encompass private households and all businesses, as part of a policy-and-legislation effort to alleviate soaring electricity costs.
- The government is considering a comprehensive reform plan, potentially including a permanent electricity tax reduction for industry, relieving consumers of the gas storage levy, and increasing federal coverage of network expansion costs, all aimed at finance relief in the face of high electricity costs.
- Critics, such as the Federation of Taxpayers Germany, have criticized the government for initially excluding households from the relief, arguing that the limited measures represent a breakdown of trust and are insufficient compared to the original commitments in finance and general news.
