Spain to cut tax on gas bills from 21% to 5% as energy prices continue to soar

Pedro Sanchez. / PE

Prime Minister Pedro Sánchez has announced that he will reduce the IVA sales tax, at least until the end of the year

Spanish Prime Minister Pedro Sánchez has announced that he will reduce VAT on gas bills from the current 21% to 5%, at least until the end of the year, given the evolution of gas prices gas on international markets, which set a new record in August.

Sánchez made the announcement in an interview on Cadena Ser ahead of a winter in which gas bills are feared to see a dangerous rise. Russia’s decision to cut gas pipelines with Germany or France, among others, has hit the international gas market, leading to soaring electricity bills as the raw material is used to produce electricity in power plants.

Minimum authorized by CE

This reduction in VAT on gas bills in Spain would join the reduction in sales tax, from 10 to 5%, on electricity bills since the spring. This is the minimum tax authorized by the European Commission.

Despite the various measures taken by the government last year to try to contain electricity and gas bills, the reality has canceled much of the effects of the plans. The Iberian ceiling mechanism has been in effect since June 15, and prices have increased this summer, but the increase would have been up to 15% higher compared to the rest of Europe if the Iberian ceiling had not been applied, said Pedro Sánchez.

best position

August has become the most expensive month in history for electricity bills, especially those related to the regulated tariff. The increase in the price of gas on the international market due to pressure from Russia and the need for supplies of reserves from all European countries has brought the average cost of production to more than 300 euros per megawatt hour.

Sánchez also pointed out that Spain is in a better gas supply position compared to the rest of its European neighbors thanks to the country’s LPG regasification plants.

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