Spain: The government announced a new reduction of VAT on electricity

The Spanish government today announced a new reduction in VAT on electricity, to 5%, in order to reduce the effects of inflation, which has reached record levels, fueled by the war in Ukraine.

“A year ago we reduced the VAT on electricity from 21% to 10%. In the next cabinet we will reduce it from 10% to 5% in order to continue to protect citizens from the effects of the war,” said the Spanish prime minister. Pedro Sanchez speaking in parliament, without specifying how long the measure will last.

The Spanish government, which in late March adopted a three-month package of measures to tackle inflation, is expected to take further action on Saturday during an emergency cabinet meeting to mitigate the effects of rising prices, which reached May. 8.7% on an annual basis.

The government has not yet clarified what other measures will be announced on Saturday, but many possibilities are being considered, mainly by the Podemos party, which joins the ruling Socialist Party in the coalition.

Labor Minister Yolanda Dias has proposed a 50% reduction in the price of public transport tickets and a € 300 check for citizens most affected by the crisis.

“Inflation is hitting families hard (…) The government has reacted quickly and decisively, but that is no longer enough. We need to step up safeguards in the face of the international crisis,” Diaz said on Twitter.

To finance these measures, many ministers proposed imposing an emergency tax on large energy companies, whose profits increased significantly last year.

It will be a “fair” measure, but we will have to see “how we can best implement it,” Budget Minister Maria Jesus Montero said on Tuesday.

Madrid has adopted several packages of measures since last summer in an effort to curb inflation. The latest and most generous – € 6 billion – was adopted in late March and provided for fuel subsidies that will run until the end of June and are expected to be extended.