The President of the Government, Pedro Sánchez, has announced plans to further reduce IVA on electricity from 10% to 5%, which he hopes will be approved this Saturday in the Council of extraordinary ministers.
The session where the announcement was made started marked by the electoral hangover from the Andalusian elections, in which the PP achieved a historic victory in the most populated territory of the country and one of the strongholds of the socialists. The measure was announced during a response to Esquerra Republicana, whose spokesman, Gabriel Rufián, had previously asked the chief executive to act in the face of rising inflation. The PP has recalled that they had raised that reduction two weeks ago and that it had been discarded.
The prospect of a long war and high energy prices for longer has forced the government to move again. The IVA reduction on electricity bills, which will go from 10% to 5%, will reduce the fiscal pressure for all electricity consumers, both domestic and business, regardless of the type of contract they have. It will affect the free market as well as the regulated one, regardless of what they consume.
A year ago, when the Government took the first step of tax reduction, electricity was subject to the general rate of IVA (21%). So, the rate became 10% and now it goes back down to 5%. In addition to lowering IVA, in June of last year the Executive abolished the electricity generation tax, from 7%, and left the special tax at 0.5%, compared to the usual 5.1%.