VALUE-ADDED tax (IVA) has been cut from 21% down to 5% on mains gas, meaning noticeable reductions in monthly bills for homes and industry.
The latter is the largest gas consumer in Spain, more so than domestic customers, so households which do not use the mains supply will still benefit indirectly from the cut, as reduction in overheads costs in industrial settings may well be passed onto the end consumer of goods manufactured.
Direct savings to households will mostly be seen in parts of Spain with the coldest weather, such as in the north and central areas.
Here, central heating powered by mains gas is more likely to be a standard feature of a property, unlike in coastal and southern parts where any form of domestic heat is typically only used for two or three months of the year at the most, meaning it is not normally considered to be worth the expense and disruption of having mains pipes fitted.
Mains gas is often present in large cities and commuter towns in warmer parts of the country, but its use for heating is far less, meaning price hikes and reductions do not have such a serious impact on household finances.
According to Spain's main consumer associations, OCU and FACUA, a typical domestic user of mains gas will save between €5 and €19 a month as a result of the IVA cut, depending upon how much they use it and what type of supply contract they have in force.
An average mains gas customer household, of 'moderate consumption' and which uses the supply for heating – about 9,000 kilowatts per hour (kWh) per year – and a private-sector provider is likely to notice a drop in bills of around €18.90 a month, or €227 annually, the OCU says.
For those on the price-regulated supply, known as TUR, savings will be lower, at around €8.60 a month or €103 per year.
Only around 20% of domestic mains gas users are on TUR contracts – one in five of the 7.9 million consumers the National Markets and Competition Commission (CNMC) has on its books.
FACUA, though, calculates that an average home which makes 'moderate use' of gas, including for heating – about 4,800kWh per year – would only save around €5 a month, or €60 annually, with the IVA reduction from 21% to 5%.
Much more heavy users – around 9,000kWh – will save about €9.60 a month, or €115.20.
The reductions in bills mentioned have not taken into account consumers whose electricity and mains gas are supplied as part of the same contract – where this is the case, the IVA will automatically be reduced from 21% to 5% for the entire bill, making savings greater still.
No IVA cuts are being made to bottled gas – used frequently by homes not on the mains for their hobs, barbecues and stove-type heaters.
Butane gas bottles will continue with IVA at the full rate, 21%, although the government froze their prices in May, meaning they will not go above €19.55 until the end of this year.
Those who have their gas bottles delivered to them and installed may be charged slightly more than the €19.55, as overheads and distributors' costs are frequently added to the price of the gas bottle.
The move comes just over a year after the government opted to reduce IVA on electricity from the top-rate 21% to the mid-rate 10%, and to cut 'electricity tax' from 5% to 0.5%, which has seen some relief to households and businesses after months of their bills rising dramatically.
At the moment, the IVA cut on mains gas will only last until January 1, although it would seem likely this would be reviewed and continue if fuel prices at source remained high.
FACUA and the OCU say the reduction is good news, but want to see it extended indefinitely and other taxes on gas and electricity slashed.
They also want to see the IVA cut on gas extended to butane bottles, and for additional tax on energy company profits – in addition to the already-announced windfall tax on electricity providers – to be levied and invested in a blanket bill reduction for homes and industry.
Madrid Polytechnic's Professor Ramón Rodríguez Pons, of the university's High Technical School of Mining and Energy Engineering, says 'expensive energy' is 'socially unsustainable'.
He says it is 'essential' to 'reduce some tax or other a bit' on all fuel, 'to give the public a bit of breathing space'.
Verónica Rivière, head of an association representing industrial consumers' interests, Gasindustrial, says the IVA reduction will 'help with cashflow at a critical time'.
She points out that IVA is not usually an 'expense' for industry, since it is either reclaimed from the tax authorities every quarter or added to the final product for sale to the end customer.
But the time lapse between paying IVA on gas used in manufacturing and either selling the product or offsetting it against quarterly IVA declarations means that a reduction in this, even if it does not mean more money overall for the manufacturers at the end of the day, does mean they are paying out less whilst waiting to recover it, improving cashflow.
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