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ARCHIVED - Spain drops VAT on electricity by a further 5 per cent
This is the second time the tax has been reduced in Spain in an attempt to stem the rise of electricity prices
The president of the government in Spain, Pedro Sánchez, has announced the very welcome news that the VAT on electricity will once again be lowered to counteract the staggering rise in energy prices. As part of his shock plan against the economic consequences of the war in Ukraine, this tax will be reduced from 10% from 5% in the coming days.
"Approximately a year ago we lowered VAT on electricity from 21% to 10% and on Saturday we are going to lower VAT from 10% to 5%," the president said, a measure that should reduce electricity bills even further.
The reduction of VAT on electricity to 10%, together with the special tax on electricity to the authorised minimum of 0.5% and the suspension of the 7% tax on the Value of Production of Electric Energy, was agreed for the first time in December 2021.
Last month, the government implemented a cap on the price of natural gas which disappointingly failed to have much of an impact on electricity prices initially, largely due to the unexpected heatwave of recent days.
Although the president has said in the past that tax cuts can’t continue indefinitely in response to the energy price crisis the government has nevertheless conceded to extend the measures once more, as consumers feel the pinch and costs soar on everything from fuel to fruit.
Filling stations are already warning that petrol prices will exceed 3 euros per litre this summer, and many politicians have warned that the government’s plan to create a National Fund for the Sustainability System will push prices up immediately. The plan, which is expected to be approved next week, aims to transfer the fixed cost for renewable directly to gas, electricity and oil companies.
The PP claims that this move “is going to increase the price of diesel and petrol by 10 cents,” arguing that it is “obvious” that companies will simply pass the added expense onto customers.
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