BERLIN -- Germany's finance ministry denied on Thursday a newspaper report that it was considering increasing tax on gasoline and diesel. Financial daily Handelsblatt said the government was mulling a hike to help bring Germany's budget deficit below three percent of gross domestic product in 2004.
"The finance ministry is not considering such a thing," a finance ministry spokesman said.
Handelsblatt said Finance Minister Hans Eichel was unlikely to agree with cabinet colleagues on planned cost cuts of 15 billion euros ($17.50 billion) and was looking for ways to make up for a shortfall in revenues.
Eichel said on Wednesday he faced a seven billion euro shortfall in tax income, double a previous projection.
The result would be a discussion of the politically sensitive fuel tax and Handelsblatt quoted coalition government sources as saying the debate had begun.
The advantage to the federal government of raising gasoline tax would be that revenue accrues to it and not regional governments and the change does not need approval from the Bundesrat upper house of parliament which the opposition currently controls.
But the Social Democrat-Greens government policy of steadily raising fuel duties in its first term in office was deeply unpopular with voters and Chancellor Gerhard Schroeder pledged ahead of elections last September the increases would stop.
Each one cent increase in gasoline tax raises 400 million euros. For diesel, the figure is 300 million euros. Handelsblatt said Eichel would face an uphill task convincing his colleagues, including Schroeder, whose home state is the base for automaker Volkswagen.
German excise duty is the second highest in the European Union, behind that of Britain. Taxes, including 16 percent sales tax, account for about 75 percent of unleaded gasoline prices.
In its first term in office, the government increased gasoline and diesel prices annually with its eco-tax by 0.153 euros per liter. The last rise took effect on January 1.