Estimating Pass-Through Rates for the 2022 Tax Reduction on Fuel Prices in Germany

Abstract

We analyze the effectiveness of the German tax reduction on fuel prices (‘Tankrabatt’) that was introduced for three months, starting on 1 June 2022. We use the synthetic difference-indifferences estimator to compare actual retail prices of gasoline and diesel to those in a counterfactual situation without the tax reduction. We find that the tax reduction has been completely passed on to consumers for most of the period. A notable exception is that passthrough rates for diesel started to decline in August while the tax reduction was still in place. Our results are robust to different approaches of constructing the synthetic control group.

Keywords: fuel, gasoline, diesel, taxes, synthetic control group

JEL Classification: C220, E310, E650, H220, Q410