Eurofound's EU PolicyWatch collates information on the responses of government and social partners to the COVID-19 crisis, the war in Ukraine, rising inflation, as well as gathering examples of company practices aimed at mitigating the social and economic impacts.
Factsheet for measure ES-2022-27/2794 – measures in Spain
|Country||Spain , applies nationwide|
|Time period||Temporary, 01 July 2022 – 31 December 2022|
|Context||War in Ukraine|
|Type||Legislations or other statutory regulations|
Promoting the economic, labour market and social recovery
– Responses to inflation
|Author||Oscar Molina (UAB) and Eurofound|
|Measure added||05 September 2022 (updated 21 September 2022)|
Russia's invasion of Ukraine at the end of February 2022 is having major consequences on all fronts, both humanitarian and economic. More than four months after the invasion, the persistence of the conflict continues to put pressure on the general price level, mainly through natural gas, fuel and food. The inflation rate has risen from close to zero in early 2021 to above 8% in June 2022, reflecting the direct impact of energy prices, and their pass-through to the prices of goods and services that use energy in their production processes. Rising electricity prices and their effect on inflation also affect households' disposable income, in particular that of the most vulnerable.
Royal Decree-Law 11/2022 (National Response Plan to the economic and social consequences of the war in Ukraine) reduces value added tax (VAT) on electricity from 10% to 5%, from 1 July to 31 December 2022.
This reduction is in addition to the one carried out in June 2021, when the government reduced this tax from 21% to 10%. It affects consumers with a contracted power of 10 kiloWatt (kW) or less, provided that the arithmetic average price of the wholesale electricity market for the previous month has exceeded €45 per Mega Watt hour (MWh).
With this discount, Spain had the lowest VAT on electricity in the EU.
This (value added tax) VAT reduction allows 27.7 million households, the self-employed and companies to reduce their bills. Almost all households benefit from the reduction of this tax. The 5% VAT rate also applies to 72.5% of electricity supply contracts for companies and businesses (non-domestic).
|Applies to all workers||Applies to all businesses||Applies to all citizens|
Social partners' role in designing the measure and form of involvement:
|Trade unions||Employers' organisations|
|Form||Not applicable||Not applicable|
Social partners' role in the implementation, monitoring and assessment phase:
In general, the Royal Decree-Law 11/2022 has been approved by the Spanish Government without the intervention of the trade unions. The trade union UGT(Union General de Trabajadores) claims that more far-reaching measures should be put in place, which should be designed and approved through social dialogue, and in particular with the trade unions, given their clear willingness to join efforts to overcome the crisis. The urgency of the situation demands a higher level of social dialogue and, in particular, the active participation of trade unions in the design and implementation of the measures.
According to the trade unions UGT (Union General de Trabajadores) and CCOO (Comisiones Obreras), in general terms, the National Plan of response to the economic and social consequences of the war in Ukraine (Royal Decree-Law 11/2022), is a set of positive initiatives, and goes in the right direction. However, they are insufficient given the scale of inflation. Therefore, although these measures will have a positive impact, more far-reaching action is needed.
In particular, the trade unions UGT and CCOO consider that the reduction of VAT on electricity is a positive measure, which can temporarily alleviate price rises. However, the tax reduction is an inefficient mechanism, as it does not tackle the real causes of the problem, represents a significant drain on public resources, and favours those with high incomes the most. Subsidies should be implemented on a case-by-case basis on each taxpayer's bills, taking into account, for example, their income. Once again, the presence of public entities in the electricity sector is also lacking.
No specific views have been identified concerning employers organisations.
Eurofound (2022), Reduction of value added tax on electricity, measure ES-2022-27/2794 (measures in Spain), EU PolicyWatch, Dublin, https://static.eurofound.europa.eu/covid19db/cases/ES-2022-27_2794.html
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Disclaimer: This information has not been subject to the full Eurofound evaluation, editorial and publication process.