Spain plans to halve VAT on electricity bills

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MADRID, June 22 (Reuters) – The Spanish government intends to halve the value-added tax charged on electricity bills to 5% in a bid to shield consumers from rising energy prices, Prime Minister Pedro Sanchez said on Wednesday.

“During the cabinet meeting next Saturday, we will lower the VAT on electricity to 5% from 10%. With this we will protect the families of our country,” Sanchez said on Wednesday during a plenary session in the lower house.

The government last year slashed the value-added tax rate on electricity to 10% from the original rate of 21% to ease the impact of wholesale electricity price rises on consumers. 

The government has also suspended a 7% tax on the value of electricity generation, which utilities ultimately pass on to the retail market price.

Soaring energy prices resulting from higher demand spurred by the post-pandemic recovery and the effects of the war in Ukraine on gas prices have contributed Spanish inflation rising to its highest levels in three decades.

The tax cut on electricity announced by Sanchez on Wednesday comes one day after Budget Minister Maria Jesus Montero said the government was planning to increase taxes on electric utilities, though he did not say by how much.

(Reporting by Inti Landauro; Editing by Alex Richardson and Hugh Lawson)

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