The announcement was launched by the Prime Minister by surprise early yesterday morning with the dual objective of lowering the energy bill paid by families and dislodging the Popular Party at the gates of the Sánchez-Feijóo debate in the Senate on next Tuesday. This is a reduction in VAT on gas that will go from the current 21% to the super-reduced rate of 5%, which will mean savings of nearly 200 million euros for companies and families during the next quarter. Transferred to the receipt, it will mean a reduction of between 5 and 9 euros per month, according to calculations by consumer organizations.
"In autumn, in winter, it is reasonable that we try to reduce the heating bill of Spanish citizens," Pedro Sánchez told the SER chain. The idea that the Government has been selling for weeks and that its president riveted yesterday is that "it works for the middle and working classes", which according to Sánchez, contrasts with Feijóo who "is quite docile with those interests that put him in front". Up to nine times yesterday he repeated the reference to the middle and working classes throughout the interview.
Sánchez presented the measure as a selective tax reduction, which is accompanied by "an equitable distribution of the cost of the war", referring to taxes on energy companies and banks in the parliamentary process with which he hopes to raise 7,000 million euros in two years.
This is a 5% VAT reduction on gas that will be applied from October to December, although leaving the door open so that it can be extended later, during 2023.
It represents a saving of between 190 and 200 million euros for taxpayers, during this next quarter, according to Treasury calculations, which are added to the more than 10,000 million that add up all the tax reductions applied to electricity from June 2021 to end of this year. Here comes the first round of measures, plus those extended and added last June, which include the reduction of VAT on electricity on two occasions, first from 21% to 10% and later up to 5%, the tax reduction special tax on electricity and the suspension of the tax on the production value of electricity.
Regarding the impact on the consumer's bill, Facua calculates that the discount for users of the regulated market will range between 5 and 9 euros per month. A user with a monthly consumption of 400 KWh who currently pays 35.92 euros, would receive a reduction of 5 euros, if the rates in force since July were maintained; while a consumption profile of 800 kWh, the bill of 67.76 euros would save 9 euros.
For its part, the OCU calculates that the cheapest rate on the regulated market will save between 8 and 9 euros per month, while the best rate on the free market, which is much more expensive, would stop paying 23 euros per month.
The savings from this measure will be less than what the tax cuts on electricity are already producing, given that households spend more than three times more on electricity than on gas and therefore, the impact of a VAT cut is also much higher . Specifically, in 2021 Spanish families spent an average of 821 euros per year to pay the electricity bill while they spent 236 euros on gas, according to data from the Family Budget Survey of the National Institute of Statistics (INE).
With this reduction in VAT on gas, Spain follows the example of Germany, which on August 18 announced a reduction in this tax from 19% to 7% from October this year and until March 2024. In Germany, its great dependence of Russian gas is wreaking havoc on the economy, but in Spain, despite enjoying a much more comfortable situation in this area, the increase in prices also takes a heavy toll.
Seen from the political plane, with this initiative Sánchez adopts one of the proposals formulated by Alberto Núñez Feijóo's PP, with the intention of leaving him without one of his basic arguments for the duel that they will maintain next Tuesday in the Senate. Sánchez has already accepted the debate by surprise and now, he has added the announcement of the VAT reduction on gas.
It is true that the popular leader will be able to argue, and is already doing so, that the Government rectifies and that it follows one of its proposals, and will propose additional actions. But, for his part, Sánchez takes away one of his predictable central arguments in a debate in which the Prime Minister will highlight his influence on European energy policy.
In this field, you will be able to use the announcement made this Tuesday by the President of the European Commission, Ursula von der Leyen, that she is preparing an emergency intervention in the electricity market, in line with what Spain has preached for so many months in Europe and Portugal.
