The Government will approve this Thursday the reduction of VAT on electricity to 10%

The Government plans to approve in the extraordinary Council of Ministers this Thursday the reduction of the VAT on electricity to 10%, compared to the current 21%, as advanced by Cadena SER and confirmed by sources from United We Can.

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The idea, explain sources from the Executive, is to adopt "as soon as possible" the measure that is "more efficient, more effective and faster", because it is necessary to tackle in an "urgent" way the problem of increasing the cost of a receipt that in June will smash records due to the accumulated rise in the wholesale electricity market.

Executive sources indicate that the idea is that it be a temporary measure, while the current increase in the so-called pool lasts, which has no prospect of remitting in the short term. United We can have proposed that the reduction be permanent for all domestic consumers who have a contracted power of up to 6 kilowatts.

The purple formation states that the reduction of the tax rate should not be subject to the evolution of the market price, since such reductions would require frequent revisions adding complexity to the system. Likewise, it defends that the measure should also affect SMEs with a contracted power of up to 15 kilowatts of power.

"Extraordinary action"

Last Thursday, the Minister of Consumption, Alberto Garzón, defended the lowering of the VAT on electricity as an "extraordinary action" while the structural reforms that the Executive has proposed to lower the price of the receipt come into operation: the blueprint to tackle the so-called benefits that have fallen from the sky of hydraulics and nuclear and the National Fund for the Sustainability of the Electricity System (FNSSE) to remove the cost of premiums for renewables from the rate Older.

Garzón, who until then had been against this VAT reduction like the rest of the members of the Government, pointed out that this measure must be "done well" so that it does not redound "to the benefit" of the companies. He also assured that the Executive is studying to approve by decree the draft law that proposes to cut the so-called benefits fallen from the sky that, according to the Government, are receiving hydroelectric and nuclear due to the increase in the cost of CO2 emission rights, which do not support these two technologies, which it plans to penalize together with the oldest wind turbines, prior to 2005, when the European emissions trading system came into force.

Garzón pointed out that there are "reasons to be alarmed" by the prospects for energy futures. It is "likely that all countries will have very complicated weeks and months", which is "sufficient reason" for this "reduction in taxation."

"We have to be aware that in our environment there are also countries with a lower tax rate that allows them to better cope" with situations like the current one, said Garzón, who alluded to the possibility that the upward spiral could stir up social protest.

The upward spiral in the price of electricity has coincided with the entry into force of the new bill, which penalizes consumption in the most expensive hours. Garzón and the minister of United Podemos Ione Belarra have asked the National Commission of Markets and Competition (CNMC) that advance at 22.00 hours the cheapest hour, as claimed by the consumer association Facua. The CNMC has discarded it as hasty.

The one that does seem ruled out is the possibility outlined last week by the fourth vice president and minister for the Ecological Transition, Teresa Ribera, of temporarily suspend the 7% tax on generation as the Government did at the end of 2018. The reduction in VAT would have an immediate effect on the consumer's bill, unlike the suspension of the aforementioned tax, which generators currently affect the pool price.


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