A week after the entry into force of the Iberian mechanism that blocks the price of gas in the production of electricity, the government of Pedro Sánchez announced another VAT reduction on electricity bills from 10% to 5%. The measure was announced during a debate in Parliament and will be approved next Saturday.
Spain was one of the first countries to lower taxes to curb rising electricity prices last year, at a time when the effects of the war in Ukraine were not yet being felt. About a year ago, VAT went from 21%, the normal rate, to 10%, but it was insufficient to curb the impact of the increase in wholesale electricity prices, which directly affects the bill they pay about 10 million euros Spanish families.
The new drop in VAT will benefit all consumers and was revealed in a debate when the opposition questioned the head of the Spanish Government about the rise in inflation and the prospect of the continuation of the war and the prolongation of its effects on energy costs . . Inflation in Spain was 8.7% in May.
Electricity is one of the products on which governments can vary tax rates, under new rules approved earlier this year. As for fuels, the VAT rules do not allow rates to be reduced, despite the request made by Portugal to the European Commission. Portugal is also awaiting authorization from Brussels to further reduce the oil tax on diesel.
In Portugal, electricity prices, especially for households, have risen much more content than in Spain and the regulator has already announced a fall of 2.6% in July, after the extraordinary rise of the same magnitude registered in April. This reduction is financed with the transfer of the income from the CO2 licenses to the electricity system and with the surplus generated by production under the special regime by selling energy at a price below the market price. Electricity in Portugal is at the normal rate of VAT, at 23%, with reduced rates in force for initial levels of consumption.
Source: Observadora
