Germany faces energy tax losses as EV sales rise

Germany is experiencing a rise in electric vehicle (EV) sales, driven by high fuel prices, according to tax and transportation expert Jens Boysen-Hogrefe from the Kiel Institute for the World Economy. The International Energy Agency reported that Europe saw a nearly 30% increase in EV sales in the first quarter of this year compared to the same period last year.

Norway leads the European market with 95% of new passenger cars being electric, while Asia-Pacific countries and Latin America also witnessed significant growth in EV sales. However, this shift in consumer preferences is not met with universal enthusiasm in Berlin, particularly at the Ministry of Finance.

The Ministry of Finance sees the EV boom as problematic because charging an electric car does not incur energy taxes, unlike traditional gasoline and diesel vehicles. The current tax system, which includes energy taxes, truck tolls, and a CO2 tax, is highly profitable for the government. If the transition to EVs continues without changes to the tax system, the road system could become a financial loss for the government, resulting in billions of euros in revenue losses.

The German government has already scrapped incentives for purchasing electric cars as of the end of 2023, but these vehicles remain exempt from vehicle tax through 2035. Companies investing in EVs continue to enjoy tax benefits. Experts advise the government not to wait until a significant tax deficit occurs before acting, as the lead time for such measures spans several legislative terms.

Several countries, such as the UK, Norway, New Zealand, Iceland, and Switzerland, have already implemented measures to address the new situation, including mileage-based fees and weight-based purchase or registration taxes. Germany is considering various policy options, including a distance- and traffic-based toll or raising the motor vehicle tax, although both options face political resistance.