The Government has once again demolished another proposal to lower the price of electricity and this time openly alleging that its rejection is due to collection reasons. After years of ignoring the request of the experts to remove subsidies that have nothing to do with electricity generation from the receiptThe Presidency has now vetoed, with the light at maximum, the bill registered by the Popular Party to lower both the costs of the system and its taxation. In its communication to Congress, La Moncloa emphasizes that Pablo Casado’s proposal “is likely to produce in the General State Budgets in force both an increase in budget credits and a decrease in budgetary income” and therefore denies its agreement to which the text is processed.
Brussels allows it
The PP law proposed the establishment of a reduced VAT rate of 10 percent “permanently and for all electrical energy supplies.” In this case, the Presidency supports its rejection in that the Government already applies a reduced rate of this tax temporarily, until December 31, and that establishing this reduction as final would force it to request another permit from Brussels. “I would require a new communication to the VAT Committee”, complains the Government, recalling that the European directive on this tax allows the governments of the Union to apply “a reduced tax rate to deliveries of natural gas, electricity or district heating” but always “after consultation.” In this sense, the Presidency also argues that “the Member States and the European Commission have made a commitment to limit the application of reduced rates in their tax structures in view of the necessary consolidation of public finances” and that Spain “traditionally appears in the reports comparative comparisons of the European Commission, the IMF or, internally, AIReF among the Member States that present a greater ‘VAT policy gap’ (loss of tax collection derived from the application of reduced rates and exemptions) ”. In 2020, Spain was the country with the greatest loss of VAT collection in the EU, but not only due to the use of reduced rates. In fact, taking only the effect of these into account, our country falls to sixth place on the list.
The Presidency continues to argue that the budgetary impact of this permanent VAT reduction would have an impact of 1,780 million euros per year. “49 percent would affect state budgets, as the rest of the performance is transferred to the autonomous communities and local entities,” he stresses.
The popular proposal also included reforming the Electricity Sector Law so that the extra costs of electricity generation in non-peninsular territories (Balearic Islands, Canary Islands, Ceuta and Melilla), a subsidy that is distributed among all electricity consumers despite being a solidarity policy territorial, will be financed at 50% by the State Budgets, instead of the current 25%. This change would reduce the final cost of electricity bills by about 490 million euros each year, as recognized by the Presidency itself in its reply to Congress. “As intended in the bill, the budget item would have to be endowed with double that amount, that is, 980 million euros,” he complains, stating once again that his priority is in the collection and not in the lowering of the electricity bill.