The Council of Ministers has approved this Friday a package of measures to cushion the effects of the war in Iran, especially on the Spanish economy, marked by the increase in prices of energy and fuels, and the fear of a new inflationary episode. These decisions were taken in an extraordinary Council of Ministers, which was marred by a Sumar challenge, which managed to include key measures regarding housing and tenant protection, which led to a tense confrontation in the corridors of the Congress between Mónica García and Félix Bolaños.
Two differentiated packages: energy and social
The plan has been divided into two well-differentiated parts: one focused on energy and another with the proposals from Sumar. Among the measures with the greatest impact, the reduction of VAT on gasoline and diesel stands out, a measure that could alleviate the increase in fuel prices after the increase in crude oil prices due to the war in Iran.
Reduction of VAT on fuels: from 21% to 10%
Since the beginning of the conflict in Iran, the price of crude oil has risen significantly, which has led to an increase of up to 30% in the price of diesel. The main factor of this crisis has been the closure of the Strait of Hormuz, a vital route for the transport of 20% of the world's oil and gas. This interruption has skyrocketed energyprices globally, with Brent crude oil exceeding 110 dollars per barrel. In Europe, this has directly impacted the prices of fuels, gas, and electricity.
The central measure of this package is the reduction of fuel VAT from 21% to 10%, which is expected to lower between 10 and 15 cents per liter. In addition, if combined with other tax cuts, such as the reduction of the hydrocarbon tax and the discounts for transporters, the saving could reach 30-40 cents per liter.
Other measures to reduce fuel costs
In addition to the VAT reduction, the Government has approved several complementary measures to alleviate fuel costs. A 20-cent discount per liter of diesel is contemplated for hauliers, with the right to the professional diesel refund, and a 20-cent aid per liter of diesel for agricultural use. An extraordinary temporary aid per vehicle has also been foreseen for those hauliers who cannot benefit from the refund.
When will the VAT reduction come into force?
Once approved by the Council of Ministers, the decree will be published in the Official State Gazette (BOE), with immediate effect. However, within a maximum period of 30 working days, the decree must be submitted to debate and vote in the Congress of Deputies. Meanwhile, it will remain in force as if it were a law. If Congress validates it, the decree will be consolidated into the legal system and may be processed as a bill to introduce possible changes. If it is repealed, it will immediately lose its validity, although the effects produced during its application could be maintained to avoid any legal vacuum.