VAT on basic foods is reduced to 0% and only oil and pasta are reduced from 10% to 5%

VAT on basic foods is reduced to 0% and only oil and pasta are reduced from 10% to 5%

The Council of Ministers has approved in its last meeting of the year the third package of measures to alleviate the effects of the crisis and continue to control inflation. A new set of measures whose scope will be 10,000 million euros in addition to the more than 35,000 disbursed since March 2021. In total 45,000 million, according to President Pedro Sánchez, who appeared today before the press to take stock of the year and detail the measures approved this Tuesday.

Sánchez began his speech by showing off his economic achievements, from the Iberian exception to inflation and employment. “Ten years ago Spain imported bailouts to the banking sector, now Spain does it by exporting solutions to the rest of Europe against inflation and the effects of war. The Iberian exception, which some called the Iberian scam, has become a success for the country that other countries of the European Union are demanding today”, he assured after recalling that the average price has been 54% below Germany, 59% less than Germany, 63% less than Italy. Spain and Iberia have a competitive advantage. “If something is clear, it is that this has meant savings for the country of more than 4,000 million euros, which translates into an average annual saving of 150 euros on the electricity bill of each home,” said the president.

Less reductions than expected in VAT on food

As for the third package of stockings to alleviate the effects of the war, which Sánchez has identified as the sixth, it contemplates a reduction in VAT on food, although somewhat more decaffeinated than expected. The VAT on essential foods that until now is at 4% is reduced to 0%, as explained by the president.

Although, the president has not mentioned this consideration, in order to make this modification, the Spanish State must have the express approval of the European Union. As for the rest of the foods taxed with 10%, only two will be reduced to 5%, pasta and oils. The rest remains as up to now at 10% and those taxed at 21% also remain to be modified.

The decree includes the demand of Podemos to implement an aid check for the most disadvantaged families. But instead of for 8 million beneficiaries as the purple ones wanted, only 4.2 million will be able to receive that check. The amount remains at 200 euros. the lowest range of those proposed and can only be requested by families whose income does not exceed 27,000 million euros.

In the field of energy, the current reductions in VAT on electricity and gas approved in March and June are extended. The price of the butane cylinder is also frozen until May 31.

housing aid

The prohibition to evict vulnerable households is also maintained until May 31 and rent increases are limited to 2% as they were until now. In addition, it is approved that in the next six months the current rental conditions and those that expire in that period are extended.

The new conditions of access to the social bonus will be extended throughout the year, until December 31, as well as the 15% increase for the minimum vital income and non-contributory pensions. Prohibition throughout 2023 of cutting essential supplies and extension of the social bonus.

sector aids

The biggest novelty in terms of sectoral aid is the approval of an aid package of 950 million euros for the so-called gas-intensive sectors, such as “ceramics”, according to the president. Of these, 450 million will be direct aid and another 500 million will be liquidity measures through ICO funds in line with those that were approved during the pandemic for sectors such as tourism.

A package of 300 million in direct aid for farmers has also been approved to compensate for the increase in fertilizers and another 120 million in direct aid to fishermen. Farmers will also be able to continue receiving the refund of the special hydrocarbons tax.

End of the universal rebate for fuels

As regards fuel, the general discount disappears, as planned, for fuel “now that its price in the markets is much lower”, according to Pedro Sánchez. Despite this, the professional road transport sectors, farmers, shipping companies and fishermen will continue to enjoy this aid. The discount of 20 cents per liter for professional road transport has been extended. It will be paid at the end of each month.

Subsidy for public transport pending from the CCAA

Lastly, the Government maintains the announced free transport in the suburbs, rodalies and the medium distance of Renfe, but they leave the aid for urban and interurban public transport linked to the decision of the autonomous communities.

“This Government will maintain the aid of 30% of the cost of urban and interurban public transport in the territories where the regional and municipal government complement it up to 50%,” Sánchez assured. The president implies that in those communities in which the aid is not supplemented there will be no reduction.

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