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Germany Proposes Climate Change Tax Plan

by Ulrika Lomas, Tax-News.com, Brussels

20 September 2019


On September 16, 2019, the German conservative parties, the Christian Democrats (CDU) and the Christian Social Union (CSU), published a report calling for reform of environmental taxes and levies to help Germany achieve its emissions reductions targets.

The CDU, the largest party by seats in the Bundestag, is in a government coalition with the CSU and also the Social Democrats (SPD).

In summary, the new report supports the polluter-pays principle, arguing that activities which lead to more greenhouse gas emissions should be taxed more heavily than those that don't, particularly in the transport and energy sectors.

However, the report rejects the need for a national carbon tax, but instead calls for energy derived from non-fossil sources to be exempt from tax, a proposal that Germany intends to push at European Union level as part of efforts to reform the EU Energy Tax Directive.

In another notable proposal, the report suggests the extension of the value-added tax reduction for rail transport fares to include long-distance journeys. Currently, only fares for journeys of less than 50km qualify to be taxed at the seven percent reduced VAT rate, with the remainder taxed at 19 percent.

However, for internal flights, the report suggests a doubling of the EUR7.38 (USD8.20) ticket tax on short-haul flights, although feeder flights would be exempt from this measure. Flights powered by non-fossil fuel propulsion systems would be exempt from the aviation tax.

Among other measures, the report also proposed:

  • A "climate premium" in the form of a tax rebate for household expenditure on emissions reductions works.
  • A package of tax incentives to encourage the building of electric vehicle charging stations and filling stations for alternative fuels.
  • Improved tax rules for energy storage.
  • Targeted tax incentives for international emissions reductions investments.

TAGS: environment | Energy | tax | investment | value added tax (VAT) | tax incentives | energy | aviation | environmental tax | carbon tax | Germany | Europe | Tax

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