The German government announced that it will reduce the tax on gasoline and diesel by 17 cents per liter. This action is considered part of a support package valued at 2.5 billion euros.
Reasons for Tax Reduction
Friedrich Merz, the Chancellor of Germany, stated: "Those who rely on their cars every day have reached their financial limits. ... This support package of 2.5 billion euros is not a small amount during times of strained budgets." This tax reduction will take effect next month.
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Impacts of Rising Prices
This action comes as fuel prices continue to rise due to the war in Iran and escalating conflicts between Iranian-backed Houthis in Yemen and Saudi Arabia. Two weeks ago, oil prices reached 100 dollars per barrel, the highest since July, leading to increased prices at fuel pumps across Europe.
Government's Future Plans
The Merz government also plans to introduce a temporary price cap for gasoline and diesel, designed based on similar policies in Luxembourg and Belgium. This price cap will take into account fluctuations in oil markets, transportation and distribution costs, and retailers' profit margins. Berlin intends to implement this measure by January 1, 2027.
Germany, through its Finance Minister Lars Klingbeil, is requesting an additional income tax from oil companies that have made billions in extra profits since the war began. This issue is on the agenda for an informal meeting of EU finance ministers in Dublin. Klingbeil has called for a proposal from the European Commission by the end of October ahead of this meeting.
Klingbeil told reporters: "Several member countries have long been calling for models." He also noted that "people can see how oil companies are exploiting this situation and significantly raising prices." However, Merz's conservatives have reacted to this proposal. Katrin Reich, Germany's Minister of Economic Affairs and Energy, stated that an additional income tax would only be reasonable if unfair price increases occur.
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