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In recent coalition committee meetings, the German government has decided on a targeted approach to electricity tax cuts, primarily benefiting energy-intensive industries. The decision, which has sparked debate and growing tension within the black-red alliance, comes as a rejection of broader tax relief for households and smaller businesses.
The electricity tax cut aims to lower the tax to the EU minimum for major industrial consumers, with the objective of protecting their global competitiveness amid rising energy costs. Finance Minister Christian Lindner defended this decision as fiscally responsible, emphasizing budget discipline and avoiding overspending, particularly after a court ruling limiting the use of unused pandemic funds.
However, proposals for extending the tax reduction to households and SMEs, advocated by some coalition partners, were ultimately rejected as they did not gain majority support. The eligibility criteria for the relief focus on operational electricity consumption above 12.5 megawatt-hours or tax liability above 250 euros annually, potentially benefiting about 600,000 enterprises, including some SMEs.
CDU/CSU parliamentary leaders, such as Friedrich Merz, have pushed for a broader electricity tax reduction, viewing the current measure as only a first step and calling for further legislative action if fiscal space permits. Merz, in particular, has emphasised the need for comprehensive measures to support households and SMEs, as well as ensuring fair redistribution of CO2 pricing revenues.
On the other hand, SPD leader Lars Klingbeil, while not providing explicit statements on this specific energy tax issue, has generally supported broader relief measures. However, within the coalition, compromises have led to the rejection of extension proposals. Klingbeil has placed the coalition agreement under financial reservation regarding the electricity tax reduction.
The coalition leaders, including Merz and Klingbeil, negotiated for five hours on Wednesday evening but were unable to reach a consensus on the energy tax reduction. The heat might have risen in the heads of unionists after the coalition meeting, indicating growing tension and potential conflict.
The energy tax will be reduced, but only for some and not for all, as announced in the coalition agreement. This cautious approach reflects the government's aim to maintain fiscal discipline while balancing energy cost pressures.
The current situation marks the coalition's first crisis, with no easy solution in sight. The three leaders now face a delicate question: whether to let the anger of the union MPs grow in the parliamentary budget negotiations or to fall into line with Merz and pretend loyalty.
Sources: [1] Financial Times, "Germany to cut electricity tax only for big industry", 14th April 2022. [2] Reuters, "Germany's coalition leaders fail to agree on energy tax reduction", 14th April 2022. [3] Handelsblatt, "Energie-Steuer: CDU-Vorsitzender Merz fordert breite Senkung", 15th April 2022.
The Parliament is considering the resolution on the Commission's communication regarding the future of the European Union, given the ongoing debate about the energy tax policy-and-legislation. The decision by the German government to reduce electricity tax only for some major industrial consumers, as outlined in the coalition agreement, has sparked discussion and politics surrounding general-news, especially concerning fair redistribution and the welfare of households and small-medium enterprises.
