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Date Published: 01/09/2022

ARCHIVED - Spain to reduce VAT on gas from 21 to 5 per cent in October

ARCHIVED ARTICLE

The Spanish government aims to save money for “working middle class” by placing higher taxes on bankers and energy companies

<span style='color:#780948'>ARCHIVED</span> - Spain to reduce VAT on gas from 21 to 5 per cent in October

The government in Spain has decided to reduce VAT on gas from the current 21% to 5% in order to reduce the amount ordinary people have to pay on their bills this coming winter.

In a situation of rising electricity bills and a shortage of gas, only part of which can be attributed to the effects on Russia’s invasion of Ukraine six months ago, the President of Spain, Pedro Sánchez, has said that this measure will be implemented in October and will remain in force until December.

However, the VAT discount may be extended into 2023 if it proves successful at bringing gas prices down.

In a radio interview with Cadena SER, Sánchez said, “The Spanish government is going to propose a reduction in VAT on gas from 21% to 5%... in line with the economic policy [of] selective tax cuts for the benefit of the working middle class.”

Although he has not yet given concrete figures on how much money taxpayers will save, he has assured that this gap will be filled with higher taxes on the profits of banks and electricity companies.

Since the introduction of the so-called ‘Iberian exception’, which has contained the price of gas by up to 15%, the government claims that homeowners in Spain have saved a total 1.3 billion euros on their gas bills.

However, one Spanish energy saving expert, Javier Dasí, has pointed out that “40% of the price of our energy bills come from electricity produced with gas, but there is no VAT involved in that”, meaning that basically this new measure will have no impact on how much we pay for our energy each month.

Since the start of the war in Ukraine, Spain has actually increased the amount of gas it buys from Russia, to the point where it is now the country’s second largest gas supplier, ahead Algeria. This Wednesday, August 31, Russia cut off all gas flows to Germany, citing new repairs to the pipeline that runs between the two countries.

Germany is already in a very difficult situation energy-wise and are already expecting gas rationing next winter, and Spain will hope to use its advanced gas storage capabilities to be able to sell its stores of Russian gas onto Germany for a profit when the time comes.

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