Federal authorities should uphold their commitments regarding the tax on electricity, as stated by Wegner. - Government promised on electricity tax should be upheld by federal authorities, according to Wegner
German Federal Government U-Turn on Power Tax Reduction Sparks Criticism
In a turn of events that has sparked controversy, the German Federal Government, led by the CDU/SPD coalition, has reversed its initial campaign promise to reduce electricity taxes for households and small businesses, including small and medium-sized enterprises (SMEs) in Berlin. This decision, announced in July 2025, now targets only larger businesses, excluding smaller companies and households from this relief due to budgetary constraints.
The U-turn was prompted by cost estimates showing that the tax cut would result in approximately 5.4 billion euros in 2025 expenses. The government justified limiting benefits to larger businesses to manage fiscal pressures. This decision, however, has faced criticism and pressure from German state leaders, including calls from several premiers to extend tax reductions to all, including private households and smaller businesses such as those in Berlin.
Kai Wegner, a member of the CDU (Christian Democratic Union) and the current Governing Mayor of Berlin, has been a vocal critic of the federal government's handling of the power tax. In July 2023, Wegner emphasized the need for tax relief for small and medium-sized businesses, specifically in Berlin. He reiterated his call for a reduction in the power tax for all companies and private households.
Wegner's focus is on providing relief for both industries and small businesses in Germany, and he has expressed his hope that the federal government will keep its election promise regarding the power tax. He also expects the Federal Minister of Finance to prioritize corrections to the power tax.
The power tax is a topic of concern for Wegner and the Berlin government. Small and medium-sized businesses, including bakeries, are heavy consumers of power. Wegner has emphasized the need for the federal government to keep its promise and reduce the power tax for everyone, not just larger businesses.
The leaders of Union and SPD at the federal level have decided against a reduction in the power tax for all companies and private households for the time being. This decision has led to ongoing criticism from Wegner and other state leaders. However, as of mid-2025, no policy change has been implemented yet.
The federal government is also planning to introduce a new surcharge on electricity consumers to fund gas-fired power plants that serve as backup capacity for renewable energy shortfalls. This levy could further increase electricity costs for all customers, including small and medium-sized businesses, complicating the cost relief scenario for them.
[1] Bundesregierung streicht Steuerkürzung für Haushalte und kleine Unternehmen, Spiegel Online, July 2025, [online] available at: https://www.spiegel.de/politik/deutschland/bundesregierung-streicht-steuerkuerzung-fuer-haushalte-und-kleine-unternehmen-a-1297846.html
[2] Bundesregierung plant Steuerzuschlag für Stromkonsumenten, Tagesspiegel, July 2025, [online] available at: https://www.tagesspiegel.de/wirtschaft/bundesregierung-plant-steuerzuschlag-fuer-stromkonsumenten/26655650.html
[3] Union- und SPD-Führung ablehnt Steuerkürzung für alle Unternehmen und Haushalte, Tagesschau, July 2025, [online] available at: https://www.tagesschau.de/wirtschaft/bundesregierung-steuerkuerzung-fuer-unternehmen-und-haushalte-101.html
- Despite the German Federal Government's decision to limit power tax reductions to larger businesses due to budgetary constraints, Kai Wegner, the Governing Mayor of Berlin and a CDU member, has urged the federal government to keep its election promise and provide relief for not just larger businesses, but also industries and small businesses.
- The federal government's plan to introduce a new surcharge on electricity consumers to fund gas-fired power plants may further increase electricity costs for small and medium-sized businesses, complicating the cost relief scenario for them, as emphasized by Wegner and other state leaders.
