Schroeder unveils energy tax proposals

German Chancellor Schroeder has presented details of proposed tax increases on petrol, gas, electricity and heating oil.

The proposals, billed as an ‘ecology tax’ are due to come into force on 1 April 1999, if approved by Parliament. The main elements of the proposal are:

– a six Pfennig/litre increase on the cost of petrol (equivalent to approx 4%);

– a four Pfennig/litre increase on heating oil;

– An increase of 0.32 Pfennig/KWH on gas; and

– A new tax of 2 Pfennig/KWH on electricity.

Revenue from the taxes will be used to fund a decrease in welfare contributions by employers and employees. A small proportion of the revenue may be used to fund renewable energy schemes, a Finance Ministry spokesperson told edie.

In order to soften the blow to industry, manufacturing industry would only pay one-quarter of the proposed increases, and more energy intensive industries would be exempt from the increases on electricity, heating oil and gas.

Naturally German industry is unhappy about the increased energy costs, but some recognise that this will be counterbalanced by a reduction in employment – as yet it is too early to tell whether the proposals will receive majority support, the spokesperson told edie.

Further details of the proposal can be found (in German) on the Finance Ministry website.

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