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Date Published: 15/03/2022

ARCHIVED - Spanish government considers lowering taxes to reduce petrol prices

ARCHIVED ARTICLE

Almost half the sale price of fuel in Spain comes from VAT

<span style='color:#780948'>ARCHIVED</span> - Spanish government considers lowering taxes to reduce petrol prices

Inflation in Spain has been on the up and up since last year, but the situation has been further exacerbated by the crisis in Ukraine and with the price of consumer products from sunflower oil to fuel reaching all-time highs, the government vowed on Monday March 14 that it would examine closely the option of reducing taxes to lessen the burden on the sectors most affected.

The Minister of Finance, María Jesús Montero, confirmed that her department is studying a package of measures which includes “revising downward taxation of some sectors or products clearly impacted by the increase in inflation.”

Earlier this week truckers went on a national, indefinite strike over rising fuel prices, among other concerns, but the minister has remained tight-lipped about whether the cost of petrol and diesel specifically will be reduced.

It would, however, seem to be a logical move: almost half of the sale price of petrol and diesel in Spain comes from the 21% VAT levied on fuel and the special tax on hydrocarbons. When it comes to unleaded 95, a staggering 43% of the price is derived from tax. This figure is somewhat lower for diesel (38%), but the raw material is more expensive.

Of course, electricity prices can’t be ignored in the inflation discussion, and the government plans first and foremost to tackle the so-called ‘benefits that have fallen from the sky’ which allow larger energy companies pass on the cost of CO2 emission rights to their customers, thus hiking up considerably the cost of domestic electricity bills.

For the time being, until Europe comes to a final decision on the matter, the price of electricity in the wholesale market is determined entirely by the cost of gas, which has shot up well past pre-pandemic prices. This increase in gas prices has generated important benefits for the large electric companies, but not the everyday consumer.

Ms Montero has argued that there are “different ways to approach these benefits” and that the Spanish government has opted for the path “of regulation” instead of increasing taxes.

Image: Wikimedia Commons

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