Next Monday, June 29, the Council of Ministers will debate whether to extend the fuel tax reduction beyond June 30, which was the established deadline. If you don’t do it, filling the tank in the middle of a vacation trip is going to hurt us a lot more than it does now.
Fuel aid. In March, the Government approved a package of urgent measures to stop the rise in energy prices caused by the war between the United States and Iran. The most visible for the driver was the reduction in VAT on fuel from 21% to 10%, accompanied by a reduction in the special tax on hydrocarbons. These measures expire on June 30 and the Government has to decide now what to do with them.
What is being studied. According to share From ABC, the Ministry of Economy is considering maintaining VAT at 10% for at least three more months, that is, until September. A gradual withdrawal of aid is also being studied to avoid the so-called rocket effectthat is, a sudden increase in prices from one day to the next in the middle of the high travel season.
What happens if it is not extended. According to the calculations of the Spanish Confederation of Service Station Employers (CEEES), the elimination of all aid would mean an increase in the price of 29 cents per liter for gasoline and 22 cents for diesel. With current prices (around 1.46 euros per liter for gasoline and 1.53 for diesel) both fuels would rise to 1.74 euros per liter.
In this way, filling a 55-liter tank would go from costing around 70 euros to close to 90. And the blow would come right in the middle of the summer operation.
The diesel thing is delicate. The Iran crisis has caused a liter of diesel to cost more than gasoline, something quite unusual taking into account the lower taxation of diesel in comparison. Although the price has fallen for four consecutive weeks, it still remains 5% above what it cost before the start of the conflict, according to collect ABC. If the reduction in the special tax on hydrocarbons is withdrawn, diesel has a good chance of once again overcoming the psychological barrier of 2 euros.
Why it is not so easy to extend it. The Government cannot extend these measures on its own because it needs the support of Congress. That means negotiating with the investiture parties, including Junts and the PNV, something that already generated tension in March when the first decree was approved.
On the other hand, there is also external pressure, since the Bank of Spain pointed out Just a few days ago, Spain has been the country in the European Union that has mobilized the most public resources in response to this crisis (0.25% of GDP), criticizing that 75% of the measures are not focused on the most affected, but are of a general nature, as is precisely the case with the VAT reduction. The European Commission and the Treasury technicians (GESTHA) also have recommended withdrawing these subsidies considering them contrary to the energy transition.
What does the transportation sector ask for? The Spanish Confederation of Freight Transport (CETM) already has asked that any extension explicitly includes the transport of goods by road. In a statement, the organization warns that “leaving transportation outside of these measures would mean ignoring the sector on which a good part of the country’s economic activity is based.” In addition, the CETM demands that the commitment to pay 20 cents per liter of fuel promised to the sector be made effective.
What does the president say? Pedro Sanchez has advanced that the new decree will be “to protect the productive fabric and also the citizens”, although without specifying the exact scope of the measures. The Government warns that, even with a peace agreement between the United States and Iran, the economic effects of the conflict will continue to pressure prices for weeks or months.
Cover image | Roberto Rodríguez and engin akyurt
GIPHY App Key not set. Please check settings