Germany Proposes Higher Commuter Tax Relief Amid Soaring Fuel Costs
German Economy Minister Katherina Reiche has proposed a temporary rise in the commuter tax allowance to ease pressure on drivers facing high fuel costs. The move comes as tensions in the Iran conflict push petrol prices upwards. Reiche has also dismissed calls for a windfall tax on oil firms, calling the idea legally questionable. The current commuter allowance, known as the Pendlerpauschale, stands at 38 cents per kilometre for every kilometre travelled. Before 2023, the rate was lower: 30 cents for the first 20 kilometres and 35 cents beyond that. In May 2022, the allowance was adjusted to 30 cents for the first 20 kilometres and 38 cents thereafter, a change set to last until December 2025. From January 2026, the rate will become a flat 38 cents per kilometre from the first kilometre.
Reiche argues that increasing the allowance would provide direct relief to drivers who depend on their cars for work. She has rejected alternative measures like fuel vouchers or price caps on petrol, warning they would misdirect policy efforts. Meanwhile, Finance Minister Lars Klingbeil (SPD) has floated the idea of a windfall tax on oil companies to curb excessive profits from rising fuel prices.
Reiche opposes this approach, stating that the concept of windfall profits lacks recognition in economic theory. She also points to a past ruling by the Federal Fiscal Court, which deemed similar taxes unconstitutional. The EU had previously introduced a temporary 33% tax on oil firms' excess profits in 2022, raising over €2 billion for member states. The proposed increase in the commuter allowance aims to offset rising fuel costs without resorting to legally uncertain measures. Reiche's stance rules out broader interventions like windfall taxes, leaving targeted tax relief as the primary solution. The final decision on the allowance adjustment will determine how drivers cope with ongoing price pressures.
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