Pedro Sánchez. / E.P.

Spain to slash tax on gas bills from 21 to 5% as energy prices continue to spiral

Prime minister Pedro Sánchez has announced that he will lower the IVA sales tax, at least until the end of the year

JOSÉ MARÍA CAMARERO Madrid

Spain’s PM, Pedro Sánchez, has announced that he will lower the IVA sales tax on gas bills from the current 21% to 5%, at least until the end of the year, in view of the evolution of gas prices in international markets, which set a new record in August.

Sánchez made the announcement in an interview on Cadena Ser ahead of a winter in which it is feared that gas bills may experience a dangerous rise. Russia's decision to cut the gas pipelines with Germany or France, among other countries, has hit the international gas market which, in turn, has led to electricity bills rocketing as the raw material is used to produce electricity in power plants.

Minimum allowed by EC

This IVA reduction on gas bills in Spain would join the sales tax cut, from 10 to 5%, on electricity bills since spring. It is the minimum tax allowed by the European Commission.

Despite the different measures taken by the Government in the last year to try to contain electricity and gas bills, reality has overturned a good part of the effects of the plans. The Iberian cap mechanism has been in force since 15 June, and prices have risen this summer, but the increase would have been up to 15% higher compared to the rest of Europe if the Iberian cap had not been applied, said Pedro Sánchez.

Better position

August has become the most expensive month in history for electricity bills, especially those linked to the regulated rate. The increase in the price of gas on the international market due to pressure from Russia and the need to supply reserves by all European countries has raised the average cost of generation to over 300 euros per megawatt hour.

Sánchez also pointed out that Spain is in a better position of gas supply with respect to the rest of its European neighbours thanks to the country’s LPG regasification plants.