What kind of savings will the new VAT reduction proposed by the government provide on the electricity bill?

Pedro Sánchez said the Iberian cap on the price of gas at the energy auction took effect last Wednesday, despite the fact that after three consecutive days of rising electricity prices, the Cabinet of MinistersNext Saturday will test the reduction of VAT on electricity from 10% to 5%. The measure will be framed in the framework of the new royal decree, along with measures to deal with the consequences of the war in Ukraine.

Sánchez assured him that this would be one of the measures the coalition manager would take to deal with the rise in energy prices. In this sense, He reminded that last year the Government reduced this tax from 21% to 10%. Although it was applauded at the time, it was a measure that could not be effective in limiting the price increase.

The Executive seeks to address this situation from two fronts: on the one hand, Application of cap on gas price at 40 Euros and on the other hand, its implementation protection measures for familiesLike this new drop in electricity VAT that will cost between 250 and 300 million public coffers

What does the new discount in VAT on electricity mean?

New discount from 10% to 5% in VAT on electricity Royal decree on new anti-crisis measures at BOE won’t go into effect until published, along with other measures contained in the new ordinance, were previously approved by Congress. Therefore, consumers are not expected to notice the VAT reduction on their electricity bills before next month.

The Minister of Finance and Public Function, of course, Maria Jesus Monteroof this measure will “undoubtedly” lower the price of electricity for citizens. Montero underlined that the Executive applied “the most significant reduction in history” on the electricity bill “compared to PP governments that increased VAT from 10% to 21%”.

“The government accompanies taxation in matters concerning the welfare of citizens,” the minister said. However, until the measure is effectively implemented, it is not possible to predict what the final savings will be on the invoicebecause it will depend on the rest of the approved measures and the day-to-day development of the wholesale energy market.

About this a possible tax on electricity companiesThe minister assured that they are “working on this financial figure” and that “what format it will be in” will be announced when it becomes known. “We’re investigating,” he explained.

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