December 4, 2020

The reasons behind the rejection of the diesel tax hike


MADRID

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The progressive equalization of the Tax on Hydrocarbons on diesel vehicles with those of gasoline was one of the great objectives of the Government. The PSOE already proposed this measure in the 2018 Budgets, still with Mariano Rajoy in power, and introduced it in the frustrated 2019 accounts project. Finally, the negotiation with PNV seems to have separated it from the project, although the nationalist party also announced that it had managed to eliminate the rise three weeks ago, which was rejected then by the Minister of Finance and Government spokesperson, María Jesús Montero, for what will have to be seen how the pacts evolve on both sides of the political board, although Ciudadanos also rejects a fiscal increase. But what does the measure entail?

Who advocates raising taxes on diesel?

The measure is a flag of the PSOE and, above all, of the Ministry for the Ecological Transition and the Demographic Challenge led by Teresa Ribera. United We can not see this tax increase with good eyes, which has an impact on low and medium incomes, as the Government warned, without specifically referring to this figure, the tax, the International Monetary Fund (IMF) in its report on Spain barely makes a week. One of the alternatives that the Executive has considered in the past consists of not including this increase in the Budgets but in some other regulation, such as that of Climate Change and Energy Transition via amendment.

Is it a good time to turn up the diesel?

The Government believes that it is necessary to progressively reduce tax incentives for diesel at a time when mobility has been reduced and the price of fuel has become cheaper, precisely due to the crisis. However, the IMF itself abounds that those fiscal increases that harm low incomes are better postponed until when the economic situation has improved.

“Measures that have a disproportionate effect on low incomes to raise VAT collection or raise environmental taxes should wait until the recovery is firm and is accompanied by spending focused on protecting the most vulnerable,” the institution stated. In the government pact between PSOE and Podemos there is no measure, which indicates that for purple training it is not a priority. The IMF and the European Commission have called for this type of tax increases in the past because our country collects 1.8% of GDP in green taxes, compared to 2.4% on the European average. However, the Washington-based body believes it is better to pass them in 2022 than 2021.

What is the tax collection effect of the measure?

The Budgets foresee that the income will increase by 450 million this year and 50 the next, 500 million that, if the PNV’s refusal succeeds, would be subtracted from the Budget project. In two weeks there have already been two measures that reduce the expected collection of future accounts. These lower revenues are added to those of the VAT reduction on surgical masks, which according to the Treasury will mean between 350 and 850 million less for the public coffers, depending on whether or not the epidemiological situation improves depending on whether the desired vaccine arrives.

In this case, Montero rejected having to adjust spending further in 2021 to compensate for this lower collection, in his words, “because the calculation of the economic forecast has been done with all those efforts.” Precisely, the rise in diesel was one of those that had less uncertainty for organizations and analysis houses, compared to the income estimates of the Google rate or the Tobin rate, about which the European Commission has already expressed its doubts.

What is the impact on the pocket?

The increase was 3.8 cents more per liter, so that the state rate went from 30.7 cents to 34.5 cents. The rate on gasoline would still be higher, at 40.07 cents today, but the distance between the two fuels would be less. Treasury estimates that an average user would have to pay 3.45 euros more per month and an additional 38 euros per year for the measure.

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