Econostrum | Economic News in the Mediterranean

New boost to VAT in Spain

Written by Arthur Maffren on Thursday, June 23rd 2022 à 16:30 | Read 278 times

In order to fight against the soaring price of energy, the Spanish government will reduce for the second time the VAT on electricity. It will be reduced to 5%. It was 21% last year.

The left-wing government of Pedro Sánchez is trying to limit the impact of inflation (photo: Moncloa).
The left-wing government of Pedro Sánchez is trying to limit the impact of inflation (photo: Moncloa).
SPAIN. The Spanish government announced on Wednesday 22 June that it would cut VAT on electricity by half, from 10% to 5%. It had already reduced VAT on this product from 21% to 10% in 2021. Prime Minister Pedro Sanchez intends to combat inflation and the sharp rise in energy prices. This flagship measure will be adopted as part of a package of decisions designed to limit inflation, which currently peaks in Spain at 8.7% (between May 2021 and May 2022). The highest figure since May 1986.
The left-wing government should introduce an inflation voucher for the poorest. It could also drastically reduce the price of public transport. To finance this spending, it is considering a new extraordinary tax on large energy companies, which have benefited greatly from the crisis with record profits.
Last April, Spain already adopted a first package of anti-inflation measures (fuel subsidies, increase in the minimum living wage, lower VAT on electricity, etc.) worth six billion euros. It was supposed to end at the end of June but will be extended until September.
According to the OECD, the inflationary crisis should cost Spain 1.4 points of growth. The OECD estimates that Spain's GDP in 2022 will grow by 4.1% against an initial forecast of 5.5%.

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