Ifo Institute Criticizes Fuel Discount: Pass-Through Incomplete, Impact Missed

Incomplete Pass-Through at the Pumps

Around 1.6 billion euros of the tax funds deployed remain with the companies, the institute in Munich announced. This means a substantial share of the fiscal relief is dissipating in the margins of the oil industry rather than reaching consumers.

The Ifo Institute also cites a further fundamental weakness. The lower gasoline prices also mean, in the Ifo Institute's assessment, that despite actual scarcity, drivers have less incentive to save fuel. The measure thereby simultaneously undermines the goal of curbing consumption in a phase of strained supply.

Wrong Target Group and Lack of Savings Incentive

In the economists' view, there is also a distributional problem. The flat-rate discount is, in the Ifo Institute's assessment, not suited to precisely helping commuters with low incomes, who would most need the support. According to the evaluation, the fuel discount primarily benefits high-mileage drivers and owners of high-consumption cars.

The Ifo Institute therefore calls for a fundamental reorientation of relief policy. Instead, the economists demand targeted measures such as an income tax reform to relieve low-income households. Such instruments reach low earners regardless of driving behavior and also create incentives for energy conservation.

Ifo Recommends End in June and Targeted Alternatives

The institute also presses for an end to the measure in terms of timing. "The federal government should not extend the fuel discount beyond June," Neumeier recommended. With the expiry at the end of June, the discount would end as planned; the Munich researchers reject an extension.

The Ifo Institute's critique carries political weight because it questions the coalition's central justification for the tax cut: rapid, tangible relief for citizens. If part of the funds remains with the companies and primarily high-mileage drivers benefit, the fuel discount misses both its relief and its distributional goals. The recommendation to the federal government is therefore not to extend the fuel discount and instead to rely on targeted instruments such as income tax reform.