June 14, 2021

Spain supports an electricity VAT of 21%, one of the highest in the European Union


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Run the washing machine at dawn or during the weekend to save at the end of the month. That is the solution proposed by the Government to lower the price of electricity bills in Spanish homes. However, different employers and political groups have repeatedly called for more far-reaching measures such as a reduction in VAT on electricity. The indirect tax that supports the electricity bill in Spain is currently set at 21%, one of the highest in the European Union. Therefore, the request passes why a 10% rate is applied in line with other neighboring countries. For example,
VAT on electricity is lower in countries like Portugal (6%)
, Greece (6%), United Kingdom (5%), Italy (10%), Ireland (13.5%), Luxembourg (8%) or France (5.5%).

The self-employed have also remembered today
, the day on which the new electricity tariff for consumers with a PVPC contract (Small Consumer Voluntary Price) comes into effect
, the need to modify the charges included in the receipt to achieve a feasible reduction of the receipt. The president of the National Federation of Self-Employed Associations (ATA), Lorenzo Amor, used the social network Twitter to underline that electricity prices are now 44% more expensive than last year and emphasize that “our country is one of the countries in our environment that taxes the electricity bill with more VAT.”

From consumer associations, such as the OCU, they also urge the Executive to apply an effective reduction of VAT on electricity. In fact, setting the rate of this rate at 10% would mean a saving on the bill of 67 euros per year, about 5.6 euros per month, according to calculations by the consumer association. On the one hand, the OCU requests that a reduced VAT be applied to electricity as it is a basic need supply, as is the case with other basic services such as transport or water. “It is not reasonable in the opinion of the organization that an essential service that needs an additional protection mechanism such as the social and thermal bonus, has a high tax,” they point out from the consumer organization.

But from the OCU they believe that lowering the VAT would not be enough and they also propose the elimination of the Electricity Tax, which penalizes the bill by another 5.11% and that, according to a spokesman for the association, “is a tax intended to finance the Autonomous Communities.”

Government refusal

Despite these demands, the Government has already shielded itself on several occasions in arguing that they have no competence to execute the descent. However, the new European directive does give the states scope to lower the VAT rate on the electricity bill to the reduced rate of 10%. In this regard, the former deputy of Citizens, Toni Cantó, today urged the Executive to apply this measure and stressed that the European Commission has just reminded (again) Spain that it can undertake a reduction in VAT on electricity.

Likewise, some members of the coalition Executive have rejected this VAT reduction as a solution to lower the price of electricity with the excuse that it would favor the large electricity companies. The Minister of Consumption, Alberto Garzón, indicated a few weeks ago that when “there is an oligopoly”, as in his opinion occurs in the electricity market,
if taxes are lowered “the profit of companies rises and the price of products is maintained”
“With the same taxes, it is about making a rule of three or a minimum use of logic to rule out the tax rate as the cause of the increase in the electricity bill,” he said about it.

The Minister of Consumption thus considers that electricity is a market “where three large companies control more than 60% of the offers in the auction and their subsidiaries more than 60% of the purchases.” “What is described in economics as an oligopoly” and where the lowering of taxes means that «Increases the profit of companies and maintains the price of products», in his own words collected by this newspaper.

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