The cut in VAT to 5%, which will give Spain the cheapest tax in the EU, is another tax cut that seeks to dampen the rise in electricity, as the government has attempted over the past year
In the past 12 months, the electric bill has virtually eliminated all the tax burden that weighed on the electric bill. The runaway prices that have characterized the energy market since last summer, with peaks in September, December and especially from March onward as a result of the war in Ukraine, have forced the government to intervene in taxation, which accounts for almost a third of its weight. of each receipt. With the announcement by the government president, Pedro Sánchez, that the Council of Ministers will reduce VAT to 5% on Saturday, taxes will hardly play a leading role.
Spain will even be the European country with the lowest VAT on electricity after this year of energy crisis. The reduction to 5% means an average saving of about 5 euros per month for an account of about 100 euros. That same receipt would be more than 130 euros, with all the taxes that were there at the time.
Tax leverage is one of the tools available to the Executive to appease unstoppable prices associated with the stratospheric cost of gas in international markets. Just a year ago, another extraordinary council of ministers approved the first measures to appease the rise in electricity bills. It then applied the first reduction of the electrical VAT of 21% where it had previously applied to 10%, the so-called reduced part.
VAT is a tax specially controlled by the European Union, which ensures harmonization to avoid distortions between Member States. In fact, any change is controlled by Brussels. The Minister of Finance, María Jesús Montero, adhered to this obligation at the beginning of 2021 to exclude any VAT reduction on electricity or other products or services. “It is an issue that would not be in line with what characterizes Europe,” he assured in January last year. A few days later, however, the ministry itself clarified that “Monero at no time spoke of prohibitions or sanctions and limited himself to provoking a recurrent view of the European Commission when it analyzes the Spanish economy and its tax system.”
With the first reduction in VAT on electricity, there was also a suspension of taxes paid by electricity producers on electricity generation, about 7%. A measure that is still in force after the extensions of the various economic action plans.
The next significant tax cut came in September 2021. After a summer of record prices, the government stepped up again with a cut that kept the Special Electricity Tax, which is also included on all bills, at the minimum possible 0.5%. This tax is also controlled by the EU, which determines on which floor the receipt cannot be disconnected. Until then it was 5%.
With the VAT at 10% and the Electricity Tax at 0.5%, citizens and businesses have spent these winter and spring months. The effect is there, but in many cases the rise in electricity prices, triggered in months like March after Putin’s intervention in Ukraine, has practically eaten up the tax cut. Many citizens no longer notice these measures. Although without them they would pay more money every month for their electricity.
Among other measures, although not linked to taxes, a reduction in electricity rates is in effect. That is, the fixed portion paid in each receipt – whether the light in a house is on or not – that is used to pay for the old renewable energy sources, insularity or the electricity shortage that has occurred in more than two decades. is constructed.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
