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Podemos to negotiate value-added tax cut on electricity from 21% to 10%
18/06/2021
NATIONAL government coalition partners Unidas Podemos has started to negotiate a cut in value-added tax (IVA) on electricity in a bid to reduce bills for householders and businesses.
According to national media, the ministry of social rights, run by Unidas Podemos' new leader Ione Belarra, has asked the ministry for energy and environmental transition, run by deputy president Teresa Ribera, to drop IVA from the top band – which has been at 21% since September 2012 – to the middle band, which is 10%.
The move comes after widespread reports that the new tariffs based upon time of day are causing bills to soar – mainly because the cheapest, or off-peak time, is between midnight and 08.00, and those who have been putting their washing machines and other appliances on during these hours have had complaints from neighbours unable to sleep.
Also, peak times, which are more expensive than prior to the changes, are typically at the time of day when householders need to do their cooking.
Electricity board Iberdrola claims the Spanish tax office is 'the biggest beneficiary' from bill payments – until the three time slots were introduced, over 60% of household bills was made up of taxes and charges, giving little incentive to save on energy use.
Teresa Ribera insists conversations over reducing IVA on electricity have 'only just started' and that no decision has been taken thus far.
She did, however, admit that the government would 'probably have to eliminate some fiscal elements' from utility bills to prevent prices for consumers rising to prohibitive levels.
Certain tax areas were temporarily removed from bills in 2018 to 'relieve' a spike in bills caused by the price of raw energy shooting up, and if a similar action is taken three years on, it will be 'provisional and due to exceptional circumstances', Sra Ribera says, and likely to be reversed 'once the situation improves'.
But if the Unidas Podemos proposal of dropping IVA from 21% to 10% prospers, it will be a permanent measure, even once energy prices fall.
The left-wing independent party had already proposed this during its electoral campaign ahead of the vote in November 2019, but at the time, only for 'vulnerable consumers'.
Consumer organisations OCU and FACUA warn that bills are at 'historic highs' at present – albeit not up to the level of 2012 – and could rise to an average of €87 a month for the average family unit.
With IVA down to 10%, this would fall just below the €80 mark – around €79.10.
If the move goes ahead, though, it would have to be carefully worked out, since it would mean the government gets around €3 billion less per year.
Another proposal by Unidas Podemos is for electricity companies to be prevented from passing on the cost to the consumer of the extras they have to pay for their 'rights' to carbon dioxide emissions where they generate power from hydroelectric or nuclear stations.
According to Unidas Podemos, neither of these sources create carbon dioxide emissions, so electricity companies are not having to pay for the 'privilege' of doing so and should not be charging customers for costs the utility boards themselves do not incur.
Sra Ribera's department said around 90% benefits obtained through this route would go to the State, which would then invest it in renewable energy source networks with a view to all Spain's power being 'green' eventually; the remaining 10% would be used to finance the 'social discount' on utility bills for low-income households.
Spain's president Pedro Sánchez had to admit this week that the rise in electricity bills was 'extortionate' and 'needed an urgent response from the government', although he did not give any clues as to what shape that response would take.
Unidas Podemos and their socialist government partners stress that the new time slots are not the sole cause of the electricity bill hike – it was merely unfortunate that this came into effect at exactly the same time that raw energy prices went up, rising to 45% above the level they were at this time last year, largely due to the price of gas and the amount paid for the 'right' to carbon dioxide emissions.
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NATIONAL government coalition partners Unidas Podemos has started to negotiate a cut in value-added tax (IVA) on electricity in a bid to reduce bills for householders and businesses.
According to national media, the ministry of social rights, run by Unidas Podemos' new leader Ione Belarra, has asked the ministry for energy and environmental transition, run by deputy president Teresa Ribera, to drop IVA from the top band – which has been at 21% since September 2012 – to the middle band, which is 10%.
The move comes after widespread reports that the new tariffs based upon time of day are causing bills to soar – mainly because the cheapest, or off-peak time, is between midnight and 08.00, and those who have been putting their washing machines and other appliances on during these hours have had complaints from neighbours unable to sleep.
Also, peak times, which are more expensive than prior to the changes, are typically at the time of day when householders need to do their cooking.
Electricity board Iberdrola claims the Spanish tax office is 'the biggest beneficiary' from bill payments – until the three time slots were introduced, over 60% of household bills was made up of taxes and charges, giving little incentive to save on energy use.
Teresa Ribera insists conversations over reducing IVA on electricity have 'only just started' and that no decision has been taken thus far.
She did, however, admit that the government would 'probably have to eliminate some fiscal elements' from utility bills to prevent prices for consumers rising to prohibitive levels.
Certain tax areas were temporarily removed from bills in 2018 to 'relieve' a spike in bills caused by the price of raw energy shooting up, and if a similar action is taken three years on, it will be 'provisional and due to exceptional circumstances', Sra Ribera says, and likely to be reversed 'once the situation improves'.
But if the Unidas Podemos proposal of dropping IVA from 21% to 10% prospers, it will be a permanent measure, even once energy prices fall.
The left-wing independent party had already proposed this during its electoral campaign ahead of the vote in November 2019, but at the time, only for 'vulnerable consumers'.
Consumer organisations OCU and FACUA warn that bills are at 'historic highs' at present – albeit not up to the level of 2012 – and could rise to an average of €87 a month for the average family unit.
With IVA down to 10%, this would fall just below the €80 mark – around €79.10.
If the move goes ahead, though, it would have to be carefully worked out, since it would mean the government gets around €3 billion less per year.
Another proposal by Unidas Podemos is for electricity companies to be prevented from passing on the cost to the consumer of the extras they have to pay for their 'rights' to carbon dioxide emissions where they generate power from hydroelectric or nuclear stations.
According to Unidas Podemos, neither of these sources create carbon dioxide emissions, so electricity companies are not having to pay for the 'privilege' of doing so and should not be charging customers for costs the utility boards themselves do not incur.
Sra Ribera's department said around 90% benefits obtained through this route would go to the State, which would then invest it in renewable energy source networks with a view to all Spain's power being 'green' eventually; the remaining 10% would be used to finance the 'social discount' on utility bills for low-income households.
Spain's president Pedro Sánchez had to admit this week that the rise in electricity bills was 'extortionate' and 'needed an urgent response from the government', although he did not give any clues as to what shape that response would take.
Unidas Podemos and their socialist government partners stress that the new time slots are not the sole cause of the electricity bill hike – it was merely unfortunate that this came into effect at exactly the same time that raw energy prices went up, rising to 45% above the level they were at this time last year, largely due to the price of gas and the amount paid for the 'right' to carbon dioxide emissions.
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