Spain to reduce electricity VAT to mitigate crisis impact

Political analysts suggest the new move by the government comes as a reaction to the PSOE’s historic defeat in the Andalusian election. [Shutterstock/ABCDstock]

A 5% VAT reduction on electricity prices, a mitigating measure included in a new anti-crisis package to be approved by the government on Saturday (June 25), was announced by Spanish Prime Minister Pedro Sánchez on Wednesday.

In a speech before Parliament, Sánchez confirmed that as of next weekend, VAT on electricity will be reduced from 10% to 5%, as part of a new anti-crisis Royal Decree intended to ease the situation facing the most vulnerable families, EURACTIV’s partner EFE reported.

“This government speaks clearly to citizens who know that the source of inflation in Spain, Europe and the world is a war on Europe’s doorstep,” he said.

Sánchez said that, a year ago, the Spanish government had approved a similar measure, reducing VAT on electricity from 21% to 10%. The Spanish executive has implemented several mitigating measures, such as a €0.20 bonus for litres of petrol or diesel.

At the EU level, Sánchez recalled that the European Commission recently approved an “Iberian exception” for Spain and Portugal, allowing both countries to cap gas prices.

With this new measure, Sánchez assured, the government is “protecting families who are suffering the consequences” of the crisis, triggered by the war in Ukraine, soaring energy prices and inflation, he added.

In his parliamentary intervention, Sánchez asked centre-right Partido Popular (PP/EPP) and other opposition forces to stop “complaining” and “criticising” the executive, formed by the PSOE and left-wing Unidas Podemos (United We Can), and adopt a more constructive position to help deal with the crisis.

Political analysts suggest the new move by the government comes as a reaction to the PSOE’s historic defeat in the Andalusian election.

In Sunday’s election (June 19), the PSOE obtained the worst result in the party’s history, dropping to 30 seats and losing all Andalusian provinces, including Seville.

The next general election in Spain is scheduled for the end of 2023 or the start of 2024, and municipal elections will be held in May 2023.

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