Berlin For the Federal Court of Auditors, the matter is clear: According to a recent report, public budgets have already come under considerable pressure due to the corona pandemic and the effects of the Russian war of aggression against Ukraine. This means that the financial leeway to cushion unforeseen events has “reduced noticeably”.
The governing coalition of SPD, Greens and FDP needs new sources of money to financially secure agreed projects. The coalition agreement provides a clue. It says: “We want to gain additional budgetary leeway by reducing subsidies and expenditure in the budget that are superfluous, ineffective and harmful to the environment and climate.”
Company cars are company cars that are also made available to employees for private use. For private use, one percent of the list price of the vehicle is taxable monthly as part of the income tax as a non-cash benefit when it is first registered. “This regulation represents a subsidy because the actual monetary benefit is many times higher,” explains the Federal Environment Agency (UBA).
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>> Read here: The secret deal – agreements made before the fight for the company car privilege
The authority estimates that company car users currently only pay 40 to 50 percent of the actual monetary benefit. According to calculations by the Federal Office, the annual subsidy volume is at least 3.1 billion euros, less conservative estimates would be more than five billion euros.
For the Greens, the fiscal company car privilege is outdated. The economist Veronika Grimm, the Federal Environment Agency and the German Tax Union also see a need for reform.
“The flat-rate taxation for the private use of a company car needs to be put to the test,” said union boss Florian Köbler to the Handelsblatt. “The regulations have become more and more complicated in recent years, especially with regard to the taxation of private use of an e-car.” In addition, these are “difficult to administer in practice and favor higher earners”.
No tax on kerosene
While motorists have to pay an energy tax of 65 cents per liter for petrol and 47 cents per liter for diesel (currently slightly less due to the tank discount), airlines do not incur such costs. Kerosene and aviation fuel are tax-free.
The Federal Environment Agency calculates for 2018: The exemption of air traffic from the energy tax with domestic sales of 10.2 million tons of kerosene and a reference tax rate of 65 cents per liter for civil aviation caused a tax loss of around 8.3 billion euros .
VAT on meat, milk and other animal products
The Grimm economy advises raising the VAT for meat from seven to the regular rate of 19 percent. The Federal Environment Agency is generally in favor of ending the reduced VAT for animal products, including dairy products, fish and eggs (volume: around five billion euros).
Because the production of these products is “very harmful to the environment and climate”, for example because animal husbandry in Germany is responsible for more than 60 percent of the greenhouse gases emitted in agriculture. In addition, there would be negative environmental and climate effects abroad, since a “considerable” part of the animal feed is imported.
The tax unionist Köbler does not believe in aligning VAT more closely with ecological criteria in the future. “The increase in the VAT rate on meat is highly questionable in terms of European law,” he said. He advises: “The state should start much earlier and put agricultural subsidies to the ecological test.”
Is the commuter allowance a subsidy?
With the commuter allowance, employees can claim the cost of travel between home and work as income-related expenses in their tax return. Specifically, this means: There is initially 30 cents per kilometer, then 38 cents from the 21st kilometer onwards. Regardless of the means of transport, up to 4500 euros per year can be deducted. If you use a car, you can claim higher costs.
It is disputed whether the commuter allowance should be classified as a subsidy. The Greens’ chief housekeeper Sven-Christian Kindler sees them as such and speaks of an “environmentally harmful subsidy”. Years ago, the researchers at the Kiel Institute for the World Economy (IfW) attested to the lump sum having a “dubious effect” because this tax concession creates incentives for long daily commutes that are neither good for commuters nor for the environment.
The Federal Environment Agency sees “considerable negative environmental effects” associated with the distance allowance, as it is called in the Income Tax Act. And points out in this context that the lump sum primarily favors car traffic. In 2016, around 68 percent of commuters used cars as a means of transport.
“It supports the growth in traffic volume and the trend towards long commutes,” says a UBA study from 2021. The latter in turn promotes the “urban sprawl” with corresponding climate-damaging effects. According to estimates by the Federal Ministry of Finance, the tax losses as a result of the distance allowance amounted to around six billion euros in 2018.
The total is likely to be even higher today. In the spring, the coalition decided on a higher flat rate as part of a relief package. Retroactive to January 1, 38 cents per kilometer can be credited, three cents more than before. This applies until 2026.
A higher commuter allowance is controversial, especially among the Greens. Consumption advocates are also critical of the instrument because, in their opinion, households with high incomes in particular will benefit disproportionately. “Rethink the commuter allowance”, therefore recommends the economics Grimm.
The tax union, however, sees no need for action. “At the current prices, the commuter allowance is certainly not a large subsidy – on the contrary, 30 cents per kilometer is disproportionate to the current costs for diesel and petrol,” said union boss Köbler.
Half of the environmentally harmful subsidies concern the transport sector
Irrespective of this, the Federal Environment Agency generally sees great potential for savings in subsidies. The study published by the authority in 2021 shows that in 2018 almost half of the identified environmentally harmful subsidies were in the transport sector. 39 percent supported the provision and use of energy, nine percent agriculture and forestry and five percent construction and housing.
Overall, the Federal Office for 2018 from environmentally harmful subsidies in the amount of at least 65.4 billion euros. Since then, the volume has only increased. According to the Federal Environment Agency, there has been little progress in reducing these subsidies since the last estimate in 2012. In the meantime, some aid has expired, for example for hard coal mining. However, new ones have been introduced.
In transport, the subsidies even increased from 2012 to 2018 from 28.6 to 30.8 billion euros. This contradicts the increase in funding programs for climate and environmental protection in recent years. “Around 90 percent of the subsidies analyzed are harmful to the climate and often have a negative effect on air quality, health and consumption of raw materials at the same time.”
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