The Spanish government will lower value-added tax (VAT) on electricity, gas, and fuel to 10 percent, down from 21 percent, as part of a new anti-crisis package responding to the war in Iran, according to reports confirmed Friday.
The measures, presented today to the Council of Ministers, also include a reduction to a minimum of 5 percent on the special tax on electricity and a cut to the tax on electricity production, currently at 7 percent. The plan aims to shield vulnerable consumers from rising energy costs, mirroring previous “shield” programs implemented in response to earlier energy shocks.
The package is the result of intense negotiations within the governing coalition, and with its parliamentary allies. Prime Minister Pedro Sánchez appealed for “responsibility” from all groups in parliament to secure its passage, according to reports. However, the government faced internal divisions, with Economy Minister Carlos Cuerpo, Finance Minister María Jesús Montero, and Ecological Transition Minister Sara Aagesen reportedly working to reconcile competing demands.
The government’s approach has been described as a “theory of the blanket,” where concessions to center-right partners, the PNV and Junts, necessitate compromises with left-wing allies, including Sumar, Bildu, and Podemos. Specifically, the PNV and Junts reportedly vetoed provisions related to housing, while the PSOE appeared prepared to rebuff demands from Sumar regarding automatic rental extensions.
The plan also includes some proposals from previous decrees that have been rejected by Congress, suggesting a strategy of repackaging and re-presenting previously unsuccessful measures. The government continues to work on finalizing the details, with potential changes possible even during the Council of Ministers meeting. The European Commission’s approval of the measures was also a factor in the finalization process.
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