IVA Cut on Electricity

Spanish PM, Pedro Sánchez, announced that he was going to reduce IVA on electricity from 10% down to 5% after having initially refused to do so.

The opposition party PP had suggested it some months ago, but he said that it wouldn’t work – IVA had already been slashed from 21% down to 10% and prices were still high.

However, he was under pressure to make a concession to his parliamentary ally, EsquerraGabriel Rufián, who had berated him over the high inflation rate.

Sr. Rufián considered that the economic situation would steam roll over the left-wing alliance if not remedied, after seeing the writing on the wall following the Andalusian Regional Elections.

This reduction translates into only a 6-euro saving on average, domestic, monthly bill (of +/- 100 euros), but at the same time it shows as a sizeable drop in income for state coffers. The concession was really aimed at industry where a 5% drop on their huge bills will make a difference.

In fact, this will make Spain one of the countries with the lowest IVA rate on electricity bills in Europe, together with Malta. Greece has 6%.

The PM said that his cabinet was already helping struggling families and businesses through other measures and continued to put the blame on the conflict in Ukraine, even though prices were already through the roof long before the war began.

The PM’s party is also at loggerheads with their coalition partner, IU-Podemos who want to raise taxes on energy-utility companies in order to finance domestic, social programs to mitigate the effects of the Ukraine War.

Meanwhile, the main opposition party (PP), flush with victory in Andalucía, wants similar cuts in the IVA levied on carbon-fossil fuels; (diesel & petrol). However, the Vice-PM, Teresa Ribera, responded that “instead of crocodile tears they should be backing Government measures on the crisis.”

Editorial comment: the trouble with cutting taxes is that the Government has to recuperate the vast costs of Covid on the economy. You can cut taxes if you are willing to cut down on the cost of administrative infrastructure that exists to provide jobs for politicians yet no party; not left nor right, is going to do that.

(News: Spain)

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