Katerina Swanson
Fuel taxes are a pressing policy issue in Europe, with the EU's green transition likely to make them a crucial aspect of policy discussions. In Germany, the government reduced fuel taxes between June and August 2022 to relieve consumers in the aftermath of the Russian invasion of Ukraine. This reduction was reflected in consumer prices, with German fuel prices falling relative to those in France. Fuel taxes in Germany are €0.4704 per litre for ultra-low-sulphur diesel and €0.6545 per litre for unleaded petrol, plus a 19% Value-Added Tax (VAT) on the fuel itself and the fuel tax.
| Characteristics | Values |
|---|---|
| Excise duty on gasoline | €0.359 per liter ($1.47 per gallon) |
| Excise duty on diesel | €0.33 per liter ($1.35 per gallon) |
| Gasoline tax in Germany | €0.6545 per liter |
| Diesel tax in Germany | €0.4704 per liter |
| Gas tax in the Netherlands | €0.789 per liter ($3.23 per gallon) |
| Gas tax in Italy | €0.728 per liter ($2.98 per gallon) |
| Gas tax in Greece | €0.700 per liter ($2.86 per gallon) |
| Tax reduction on fuel in Germany | €0.3055 per liter for gasoline and €0.1404 per liter for diesel |
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What You'll Learn
German fuel tax rebate
In June 2022, the German government implemented a temporary reduction in fuel tax, known as 'Tankrabatt' in Germany. The tax cut, which lasted for three months, was in response to sharp increases in fuel prices caused by concerns over potential reductions in Russian oil and gas exports to Germany following the Russian invasion of Ukraine.
The tax reduction applied to gasoline, diesel, liquefied gas, and petroleum gas. The German government lowered the tax on fuel by up to 35.9 cents for this period. This amounted to a rebate of up to 105% according to one source, while another source states that the tax reduction was passed on to consumers for most of the three months.
The impact of the tax reduction on fuel prices has been studied using synthetic difference-in-differences (SDID) estimation, which compares actual retail prices of fuel with a counterfactual situation without the tax cut. These studies found that the tax reduction was completely passed on to consumers for gasoline, with prices falling by 30 cents relative to those in France after 1 June. For diesel, there is evidence of at least a partial pass-through, with prices falling by 17 cents relative to France. However, the pass-through rates for diesel started to decline in August while the tax reduction was still in place.
The effectiveness of the tax rebate in lowering prices for consumers has been questioned, with some arguing that it amounted to a subsidy for the oil industry. The pass-through of the rebate to consumers depends on the elasticity of demand and supply. Even in a competitive market, the pass-through rate may not be 100%.
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German fuel tax rates
Fuel taxes are a pressing policy issue in Europe, with the EU's green transition likely to make them a crucial aspect of policy discussions. In the context of the Russo-Ukrainian War, rising energy prices, and deteriorating economic conditions, fuel taxes have been a central policy consideration for European countries.
In Germany, fuel taxes have been a key concern, with the German government proposing a tax reduction on fuel ("Tankrabatt") from June to August 2022 to relieve consumers. This involved a temporary reduction in the energy tax on fuels, including gasoline, diesel, liquefied gas, and petroleum gas. Before this intervention, the tax on gasoline was 65.45 cents per liter, while the tax on diesel was 47.04 cents per liter, excluding value-added tax (VAT). With a VAT rate of 19%, the total tax on gasoline was 63.9%, and on diesel was 59.3%.
The impact of the tax reduction was studied, and it was found that the tax cut was passed on to final consumers for both E5 fuel and diesel, with pass-through rates of 85% for gasoline and 100% for diesel. However, the effectiveness of this intervention in terms of its price effects for consumers has been debated, and some argue that it may have been a form of subsidy to the oil industry.
In comparison to other European countries, Germany's fuel taxes are relatively high. For example, the Netherlands has the highest gas tax in the EU at €0.789 per liter, followed by Italy and Greece. The EU requires a minimum excise duty on petrol of €0.359 per liter, which is only adhered to by Malta, with all other EU countries levying higher duties.
Overall, fuel taxes in Germany are a significant component of fuel prices, and the government's interventions to reduce these taxes have had varying effects on consumers, with potential implications for the oil industry as well.
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German fuel tax cuts
Fuel tax is a mandatory payment collected by governments from individuals or businesses to cover the costs of general government services, goods, and activities. In Germany, fuel taxes are €0.4704 per litre for ultra-low sulphur diesel and €0.6545 per litre for conventional unleaded petrol, plus Value Added Tax (VAT) (19%) on the fuel itself and the Fuel Tax.
In June 2022, the German government implemented a temporary reduction of the energy tax on fuels (gasoline, diesel, liquefied gas, petroleum gas) to relieve consumers from the sharp increase in fuel prices due to the Russian invasion of Ukraine. The tax reduction, known as "Tankrabatt" in German public discourse, was in effect from June to August 2022. During this period, the tax on gasoline was reduced from 65.45 to 35.9 cents, while the tax on diesel was lowered from 47.04 to 33 cents per litre. This implies a tax cut after VAT of 35.16 and 16.71 cents, respectively.
The impact of the tax reduction was studied by comparing weekly average gasoline and diesel prices in Germany and other European countries that did not implement similar measures. It was found that the tax reduction was completely passed on to consumers for gasoline, with prices falling by 30 cents relative to France. For diesel, there was evidence of at least a partial pass-through, with prices falling by 17 cents relative to France, implying pass-through rates of 85% for gasoline and 100% for diesel.
The effectiveness of the tax cut in terms of its potential price effects for consumers has been questioned in the public debate. Some argue that the tax rebate is a form of subsidy from the Federal Government to the oil industry, undermining the policy's original purpose. However, studies using Austria as a control group found that the tax cut was passed on to final consumers for both E5 fuel and diesel, with no evidence of increasing prices relative to Austria in the two weeks following the tax break.
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German fuel tax and consumer prices
Fuel taxes are a pressing policy issue in Europe, with the EU's green transition likely to be influenced by them. The German government proposed a tax reduction on fuel known as "Tankrabatt" in June 2022 to alleviate consumers' financial burdens in the aftermath of the Russian invasion of Ukraine. This reduction was implemented via a temporary decrease in the energy tax on fuels such as gasoline, diesel, and liquefied gas.
The tax reduction on gasoline was completely passed on to consumers, resulting in a price decrease of 30 cents compared to France. For diesel, there was evidence of at least a partial pass-through, with prices falling by 17 cents relative to France, indicating a 100% pass-through rate. The effectiveness of this intervention has been debated, with some arguing that it may be a subsidy for the oil industry rather than a benefit for consumers.
In Germany, fuel taxes are levied on both gasoline and diesel. The tax on ultra-low-sulphur diesel is €0.4704 per litre, while the tax on conventional unleaded petrol is €0.6545 per litre. In addition, a Value-Added Tax (VAT) of 19% is applied to the fuel itself and the fuel tax. With a VAT rate of 20%, taxes account for 59.3% of the total cost of diesel fuel and 63.9% of the total price of gasoline.
The German government's decision to reduce fuel taxes was made to comply with EU requirements and ease the economic strain on consumers. The pass-through rates for gasoline and diesel were high, indicating that the tax cuts were largely passed on to consumers. However, the complex dynamics of fuel pricing and the potential influence of other factors, such as supply and demand elasticity, make it challenging to isolate the impact of the tax rebate.
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German fuel tax and the EU
Fuel taxes are a pressing policy issue in Europe, with the EU requiring member states to levy a minimum excise duty of €0.359 per litre on petrol ($1.47 per gallon) and €0.33 per litre on diesel ($1.35 per gallon). The EU's minimum excise duty is just that—a minimum—and many countries exceed it. For example, the Netherlands has the highest gas tax in the EU at €0.789 per litre ($3.23 per gallon), followed by Italy at €0.728 per litre ($2.98 per gallon) and Greece at €0.700 per litre ($2.86 per gallon).
In Germany, fuel taxes are €0.4704 per litre for ultra-low-sulphur diesel and €0.6545 per litre for conventional unleaded petrol, plus a 19% Value Added Tax (VAT) on the fuel itself and the Fuel Tax. In 2022, Germany implemented a temporary cut in fuel taxes from June through August to relieve consumers of rising gasoline and diesel prices. This was in response to the Russian invasion of Ukraine, which caused fuel prices to increase sharply due to concerns about possible reductions in Russian exports of oil and gas to Germany. The tax reduction was fully passed on to consumers, with German prices falling by 30 cents for gasoline and 17 cents for diesel relative to France.
The German government's decision to cut fuel taxes was part of a broader stimulus package introduced in April 2022 to relieve citizens amid high inflation rates. Germany's inflation rate reached 7.4% in April 2022, the highest since 1981. The stimulus package was worth 14-16 billion Euros.
Fuel taxes are an important aspect of environmental policy, with organisations such as the Intergovernmental Panel on Climate Change calling on governments to increase gasoline tax rates to combat the social and environmental costs of gasoline consumption. Fuel taxes can act as an implicit carbon pricing mechanism.
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Frequently asked questions
The fuel tax rate in Germany varies according to the type of fuel. As of 2023, the tax on ultra-low-sulphur diesel was €0.4704 per litre, and for unleaded petrol, it was €0.6545 per litre. In addition, there is a 19% Value-Added Tax (VAT) on the fuel itself and the Fuel Tax.
Fuel tax rates vary across Europe. In 2024, the Netherlands had the highest gas tax in the EU at €0.789 per litre, followed by Italy at €0.728 and Greece at €0.700. The minimum excise duty required by the EU is €0.359 per litre for petrol and €0.33 per litre for diesel.
In response to rising energy prices after the war in Ukraine, the German government implemented a temporary tax rebate on fuel prices, also known as "Tankrabatt", from June to August 2022. The tax on fossil fuels was reduced to the minimum level required by the European Union. For gasoline, the tax was cut from 65.45 to 35.9 cents per litre, and for diesel, it was lowered from 47.04 to 33 cents per litre.
The effectiveness of the tax rebate in Germany has been debated. Some studies found a pass-through on consumer prices of up to 105%, while others observed a partial pass-through, with declining pass-through rates over time. The tax rebate's impact also varied across different regions and fuel types.
Critics have argued that the tax rebate may be a form of subsidy from the German government to the oil industry, which could undermine its intended purpose of providing relief to consumers. Additionally, the dynamic nature of gasoline prices, influenced by various factors, makes it challenging for consumers to infer the direct impact of the tax cut on prices at the pump.
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