The Government has sufficient fiscal margin to continue reducing the public deficit and, in turn, extend the anti-crisis shield for another half year with general tax bonuses, some reduced, which entail a million-dollar decrease in income. With this premise, PSOE and Sumar finalized throughout yesterday the negotiation of the great omnibus royal decree law that the last Council of Ministers of the year plans to approve today.
The Government assumes that it is necessary to continue protecting the most vulnerable sectors of society with a new partial extension of the social shield. The decree will surely contain a reduction in VAT on basic foods until June 2024. The measure is, without a doubt, the most costly in terms of spending, since it is universally applicable regardless of income. The Tax Agency has stopped entering more than 1,500 million between January and November of this year for this bonus.
Government sources report that there will be a reduced extension of the energy tax reductions, but throughout the year. Specifically, the VAT on electricity will go from the current 5% to 10%. The Treasury decided to reduce it from the usual 21% to 10% from July 2021 and in September of the same year it left it at 5%. In 2022, the year with the highest incidence of the energy crisis, the cost of this tax credit was more than 1.3 billion.
Gas VAT, for its part, will be reestablished with lower rates, below 21%, but above the current 5%. During this year the Tax Agency has stopped receiving more than 300 million for this tax relief.
The special tax on electricity, reduced to 0.5% since September 2021, will also be raised progressively, although always below the values ??prior to the crisis. Maintaining the bonus would have cost more than 1,000 million. And finally, the tax on the value of electricity production, suspended until now, will be recovered at lower rates. In the worst of the energy crisis, revenues of 3.4 billion were lost due to this figure alone.
In total, extending the VAT bonus on food throughout next year will cost 1,350 million, according to estimates made by the Treasury in the Budget Plan sent to the European Commission in October.
The coalition government held intense conversations yesterday to close this year-end decree that President Pedro Sánchez will present at his annual appearance in December. PSOE and Sumar, in fact, clashed over two measures: the bank tax and free public transportation.
Regarding taxes on large energy companies such as Repsol, Iberdrola, Endesa, Naturgy or Cepsa, the PSOE has been proposing for several weeks to include in its reform a series of deductions for companies that, in the absence of extraordinary benefits due to the stabilization of energy prices, reinvest their profits in projects related to the energy transition. Sumar, for its part, demands to maintain the tax under the terms agreed in the coalition pact “so that banks and energy companies continue to contribute to tax justice and the maintenance of the welfare state.”
Another point of friction was the free public transport that Sánchez himself announced in his investiture speech that would be free for minors, young people and the unemployed. Yesterday Sumar tried to open this measure to the entire society as a transversal measure.
The Government will include in the omnibus decree an extension of the suspension of evictions for vulnerable families who do not have a housing alternative. The Ministry of Housing advanced the decision last Friday, but EH Bildu announced yesterday an agreement with the Executive to extend the measure throughout 2024. The national coalition highlighted yesterday that this prohibition and the 3% cap on the renewal of contracts rent, contemplated in the Housing Law, “represent two essential measures in the face of the difficult housing situation experienced by thousands and thousands of families.” The prohibition on cutting off basic supplies for groups in the same vulnerable situation will also remain in force as of January 1.
The Government will also extend the discounts on the social electricity bonus, essential help for the most vulnerable consumers. Currently it represents a reduction in the electricity and gas bill from the original 25% to 65%. In the case of the severely vulnerable, the reduction has gone from 40% to 80%. The TUR4 regulated rate for community boilers will also be extended.
The Ministry of Transportation is inclined not to maintain discounts on the fuel consumed by transporters. Until December 31, professional drivers benefit from a discount of 10 cents per liter of fuel. The Government recalls that transport can now, after a legislative modification, affect the increase in its costs in the price of its services.