The Briefing

A single person to pay €150 more per year?!

The new gas levy. An overview of everything you need to know!

August 18, 2022
Reading time 2 min.

🚨 If your home uses gas:

If you have gas central heating, a gas oven, or use gas to power your appliances, then your gas bill will increase from November or December because of the so-called ‘gas levy’. How much you’ll pay will depend on how well your apartment is insulated, but it’s estimated that a single person living in a 50 sq meter apartment can expect to pay about €150 more per year! This is on top of the fact that gas prices are already higher because of inflation.

😅 If your home doesn’t use gas:

... then the new levy probably won’t affect you. Lucky you! Almost half of all German households heat with gas — so if you are subletting, then the main tenant may raise the rent to compensate for the increased gas price.

If you've never paid for gas before then you probably don't know how much it costs. Let us shed some light: a single person in a 50 sq meter apartment will probably pay between €235 - €305 a year. As this is set to rise by about €150, that’s an increase of up to 50%

🏛 Why is the government raising gas prices?

It might feel kinda annoying that the gas levy is being introduced right now, as everything is already getting more and more expensive because of inflation and other rising energy costs. But there is a reason for the levy: gas importers are obliged to supply gas. And that’s a good thing as it means we can’t suddenly be left without any.

But Germany currently imports most of its gas from Russia — and they’ve reduced the supply by 20%. Therefore, gas importers need to act quickly and buy it from elsewhere, but buying it at short notice makes it more expensive and there are extra costs incurred.

Because of all these increased costs, gas importers could go bankrupt — yet they are obliged to continue delivering gas. That's why the federal government is intervening and changing the prices for the customer, so that the costs are more evenly distributed. If there’s one thing to take away here, it’s that trying to use less gas is a very good idea!.

❓ What happens to customers who have a fixed-price gas contract?

It’s not yet clear what will happen in this situation!

📅 Will the gas levy be reversed at some point?

The gas levy is set to remain in place until April 2024.

🔍 What kind of funny phrase is ‘gas levy’ anyway?

Those of us who didn't study business administration might not have a clue what levies are! We googled it for you: A levy basically means that certain costs are distributed amongst different players. In this gas example, per person there is going to be a gas levy of 2.4 cents per kilowatt hour.

💡 How could the gas levy be made more bearable?

1. Unfortunately, not with a waiver of VAT

Christian Lindner, the German finance minister, asked his EU colleagues to reduce the VAT on gas (currently at 19%) to help ease the burden. It seemed like a reasonable request — books, for example, have a VAT rate of just 7%. The EU rejected a total waiver, but has at least raised the possibility of a reduction, one that would cut VAT to 5%.

2. With an excess profits tax

Some people believe that the so-called ‘excess profits tax’ is a fair solution — these people are pretty upset with Christian Lindner because he’s not a fan of this solution.

The excess profits tax is paid by companies that stand to make extra profit out of a crisis. For example, oil companies in the UK have to pay a 25% tax because they are making massive profits right now.

Christian Lindner fears that such a tax in Germany could play havoc with our overall tax system and he thinks it could harm Germany as a location for innovation.

3. By extending the 9-Euro ticket or fuel discount

This would be nice!

🔥 What this means for you

  • If you are a gas customer, keep an eye on your mailbox as there’ll be an announcement letter arriving in early October about how much more you'll have to pay.
  • You might want to consider making a savings pool for living expenses, and include a savings pool for little surprises.
  • Unfortunately we can expect that the price of gas will continue to increase into the foreseeable future, and that inflation will do the same — especially because the 9-euro ticket and the fuel discount will expire at the end of August.

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