The Bundestag has given the green light for a temporary reduction in VAT on gas and district heating.

This should relieve consumers from October 2022 until the end of March 2024 with a total of more than 13 billion euros.

The traffic light factions SPD, Greens and FDP voted for the legislative plans on Friday.

From the opposition, the CDU/CSU and AfD voted in favor.

The left abstained.

The VAT rate is thus reduced from 19 to seven percent.

According to estimates by the Ministry of Finance, this will result in less than eleven billion euros in tax revenue for gas - but this depends heavily on how the currently fluctuating gas price develops.

District heating is about 2.1 billion euros for the state as a whole.

The VAT reduction was originally intended to compensate for the planned gas levy, which would have placed an additional burden on end consumers in order to support gas importers.

However, the surcharge was reversed at the last minute after much criticism and the announced nationalization of Uniper, Germany's largest gas importer.

Scholz promises “massively falling” gas prices

Federal Finance Minister Christian Lindner (FDP) said in the Bundestag that the state should not be the beneficiary of rising prices, which is why VAT on gas is now being reduced.

"The gas price has to go down overall."

The financial policy spokeswoman for the Green Group, Katharina Beck, said that ideally prices would be reduced by around ten percent.

The opposition criticized that prices would rise much more, so that in the end there would be no relief at all.

According to Chancellor Olaf Scholz, gas prices for citizens and entrepreneurs in Germany will fall drastically as a result of the government's new measures.

"It's about a massive reduction in gas prices," Scholz said on television on Thursday.

The commission that has been appointed will make proposals “in mid-October or a little earlier” about the precise design of the gas price brake.

The government will then subsidize prices down as long as they are too high.

In the meantime, care will be taken to ensure that more natural gas is available to replace Russian supplies.

"In the end, prices should reach normal levels again," said Scholz, without saying what price level he meant by that.

Habeck warns to save

Germany has the financial strength to stick to this course, Scholz said.

It has the lowest debt ratio among the major western industrialized countries (G7).

As much money will be used as needed in 2022, 2023 and, if necessary, also in 2024. The government had previously announced a protective shield of up to 200 billion euros.

Scholz defended himself against the accusation that it was a shadow household.

Germany took out large loans earlier during the crisis and then repaid them after the crisis because it was able to maintain its economic strength.

This will also be the case this time.

Economics Minister Robert Habeck meanwhile warned that saving energy remains essential despite the planned gas price cap.

“We still have to bring gas consumption down.

20 percent is the target for Germany,” said the Green politician on Deutschlandfunk.

"If households don't bring their consumption down, there's still a risk that we won't have enough gas in winter." Therefore, the upper peaks of consumption would not be capped, so that there would be an incentive to save.

However, the precise design of the gas price cap is the task of the commission that has been set up.

Habeck did not rule out that consumers would also be relieved of the rising energy prices through a premium that would be taxable.

“It cannot yet be ruled out that this will happen.” But he emphasized that the money had to be paid “quickly and lump sum” and that no complicated processes had to be set in motion.

“Not every price increase will be taken.

A certain burden will be taken, but the entire burden will not be taken – not even with this gigantic 200 billion euros.”