The Central Government has at last taken a step to combat the high cost of electricity, drawing praise, as well as criticism for not going far enough.

The move in question is to drop the IVA charged on electricity bills down from 21% to 10%, but this will be a temporary measure lasting until the end of the year.

Furthermore, there is a second tax that is levied on all electricity bills charged at seven percent (this is used to finanace green-energy initiatives) which will be suspended for three months.

According to the Autoridad Independiente de Responsabilidad Fiscal, with this drop in IVA the Central Government will lose some 1.300 millones in revenue and another 1,000m euros for the 7% suspended tax. Interestingly, IVA is also levied on this tax, meaning that it is a tax on a tax.

Bear in mind the figure of 1,300m euros is an annual, loss rate, therefore the total loss or what is left of 2021 is around 650m euros.

These temporary measures are seen by some as a ‘patch’ on the problem rather than a solution and that the answer lies with reducing the huge benefits enjoyed by such utility companies.

(News: Spain)