Substitute general and indiscriminate aid for energy and food, via tax cuts, with selective measures towards the most disadvantaged classes. This is the recommendation launched by the Foundation for Applied Economics Studies (Fedea) this Monday in a comprehensive report signed by Ángel de la Fuente in which he analyzes the economic situation and the Government’s response to the crisis in Ukraine.

The study center values ​​”very positively” the decision taken at the end of last year to change the general fuel bonus for a series of specific measures aimed at the sectors most affected by the increase in fuel prices. “It would be convenient -explains Fedea- to apply the same logic in the case of tax reductions on energy and basic foodstuffs, which should be replaced by direct and selective aid”.

In other words, that the reduction in VAT on basic products in the shopping basket, the same tax on electricity, the abolition of the generation tax and other similar measures are not general, for the entire population, but are aimed to the most vulnerable families and businesses. This, adds Fedea, “will result in substantial savings in public resources, encourage energy savings and improve the distributive impact of the aid”.

What is happening with the VAT reduction on food, as has already happened with fuel, is that the tax measure is benefiting higher incomes more than those most in need. Of the total fiscal cost of the measure planned between January and June, which Fedea estimates at 700 million euros, “only 31% will be transferred in the form of savings to the two lower income quintiles”, that is, to the most needy layers of the society.

Fedea calculates that the food VAT reduction during the first half of the year will save consumers just under 40 euros per family on average, at current prices. They are 6.6 euros per month. A calculation similar to that made by Funcas, which estimated the average savings at 43 euros in the aforementioned six months.

“Thus, if we replaced the VAT reduction with direct aid concentrated in the 40% of households with the lowest income, the cost of the measure would be reduced to a third of the current one or, alternatively, we could multiply the average aid per household by three beneficiary with the same added cost”, says Fedea.

Professor De la Fuente’s report also recommends “ensuring that such aid reaches all recipients quickly, including the least informed”. It is one of the problems with aid, that some layers of the population do not get to know about it and, therefore, do not request it. Or that they don’t do it either because of the cumbersome bureaucratic procedures.

“To achieve this, it would be necessary to invest in a system that allows funds to be sent quickly, via transfer or lower personal income tax withholdings, to groups determined in accordance with objective conditions, such as income level and household size, without the need for the eligible people have to make an express request, which delays the arrival of aid and tends to leave many of those who need it most without it ”, he concludes.