Sunday, June 13

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 (which cut it from 23% to 6%), Greece (6%), United Kingdom (5%) Italy (10%), Ireland (13.5 %), Luxembourg (8%) or France (5.5%), according to official data from the European Commission.

The self-employed have also recalled today, the day on which the new electricity tariff for consumers with a PVPC contract (Voluntary Price of the Small Consumer) comes into force, the need to modify the taxes included in the receipt to achieve a feasible and real reduction. The president of the National Federation of Self-Employed Workers’ 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.”

VAT on electricity in Europe
VAT on electricity in Europe – ABC

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 supply, as is the case with other basic services such as transport or water. “It is not reasonable 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.

Despite this, 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

At the moment, the Government refuses to lower the VAT despite the savings it would mean for consumers’ pockets. The Government has already shielded itself on several occasions in arguing that they have no competence to execute the descent. The Minister of Finance and spokesperson for the Executive, María Jesús Montero, justified herself a few weeks ago by saying that Brussels had called Spain’s attention “for the abuse of the reduced VAT.”

However, sources from the European Commission confirm to ABC that Member states do have room to lower VAT in some sectors such as electricity or natural gas. The same sources point out that countries are obliged to consult the European Committee on VAT beforehand, although it is a mere “formality”. 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 this indirect tax on electricity.

Oligopoly

Likewise, some members of the Coalition Executive have rejected this tax cut as a solution to lower the price of electricity and they allege that those who would ultimately benefit would be the large electricity companies. The Minister of Consumption, Alberto Garzón, indicated last February in the Senate – after the peak of the price of electricity during cold weather – that when “there is an oligopoly”, as in his opinion occurs in the electricity market, if they go down taxes “increase the profit of companies 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,” Garzón said in this regard.

The Minister of Consumption thus considered 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 the companies and maintains the price of the products», according to his own words spoken in the Upper House.

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