Merz on electricity tax proposal: Adopting an optimistic stance
In a move that has raised eyebrows and sparked controversy, Chancellor Friedrich Merz's government has decided to prioritise tax relief for businesses, especially in the manufacturing and agricultural sectors, while shelving the promised electricity tax cuts for private households. This decision, a stark departure from the coalition agreement between CDU, CSU, and SPD, has led to accusations of broken promises and increased financial burdens on consumers in the context of already high electricity prices in Germany.
The coalition agreement had promised a reduction of electricity tax by at least five cents per kilowatt-hour for everyone, including private households. However, the government's 2025 budget only provides relief for companies meeting certain criteria, such as annual consumption above 12.5 MWh or tax liability over 250 euros, which excludes most private households. As a result, households, which consume on average about 2,050 kWh/year, miss out on potential savings of up to 200 euros annually for families.
The CDU/CSU parliamentary leaders are advocating for broader reform to extend tax reductions also to households and Small and Medium Enterprises (SMEs), but no concrete measures have been enacted yet.
Amidst this controversy, Chancellor Merz has stood behind his minister and deputy chancellor regarding the escalating electricity tax dispute in the coalition committee. However, he has suggested that there might be potential for relief on electricity taxes for private households in the future.
In other news, Chancellor Merz has met with US President Donald Trump three times and is in favour of increasing sanctions against Russia and delivering more money and weapons to Ukraine. He also reiterated that Germany will not become a party to the war in Ukraine.
On the international front, Merz believes that Germany must prepare for the USA to maintain its engagement, but not as it has in the past 70 years. He also supports the idea of possible cooperation with France on a nuclear umbrella for Germany.
domestically, Merz has important goals for the next four years, including making Germany strong and competitive again. He plans to relieve the economy first, affecting about 600,000 companies, and small households. To achieve this, savings are needed, and one potential area for savings is the citizens' allowance, where about ten percent could be saved, according to the Federal Ministry of Labor.
In a bid to ease the financial burden on citizens, the gas storage surcharge will be abolished or taken over in the federal budget, and consumers will no longer pay for it. Additionally, the retirement age will not be raised, but those who want to work longer will get a tax incentive of 2000 euros per month that will be tax-free.
Looking ahead, Merz has given his first lengthy television interview on ARD, lasting over 600 minutes, where he discussed his vision for Germany's future and his plans to make the country stronger and more competitive on the global stage.
[1] Source: Spiegel Online [2] Source: Der Spiegel [3] Source: Tagesschau
- The government's decision to prioritize tax relief for businesses, as outlined in their community and employment policies, has sparked controversy, particularly as it contradicts the earlier coalition agreement's promise of electricity tax cuts for private households.
- Despite advocacy from CDU/CSU parliamentary leaders for broader reform to include households and Small and Medium Enterprises (SMEs), the government's 2025 budget only provides relief for specific businesses, highlighting the ongoing politics and general-news surrounding the electricity tax dispute in Germany.
