VAT on electricity bills threatens to rise to 21% in March and the government has no plans to avoid it

He VAT on electricity bill threatens to rise from 10% to 21% in March as a result of a fall electricity price. The law states that if the wholesale market closes the month below 45 euros per megawatt-hour, the tax rate will automatically increase. And now everything indicates that the period will indeed end below this level, to which we must add that, at least for now, The government does not have any plan or measures to avoid this rebound..

The possibility of such an increase has become even more apparent in recent days. Storm Louis Wind energy production has increased dramatically, and the availability of solar energy is also important. As a result, the average wholesale price electricity it is located for February at a price of 42.43 EUR/MWh and while this points to higher prices this Wednesday and Thursday, this is likely not enough to put the monthly average above €45/MWh, according to sector sources, Europa Press was told.

The legislation, for its part, formulates this issue very clearly. A rate of 10% will apply “to holders of contracts for the supply of electricity whose contracted capacity (fixed power term) is less than or equal to 10 kW, regardless of the level of supply voltage and the method of concluding the contract, when the arithmetic average price of the daily market corresponding to the last calendar month preceding last day of the billing period exceeded ¤45/MWh“.

This was stated in the norm according to which initially VAT reduced to 5% in full price crisis, and it remained so when it was raised to 10% on January 1 this year. This second measure applies until 31 December 2024, so if the wholesale price falls below this level of 45 euros per megawatt-hour in subsequent billing periods, the VAT that will be applied again will be 10%.

But for now, if the forecasts come true, households will experience average income growth. 7.48 euros compared with receipt a year ago, that is, when the 5% rate was applied. If the same exercise is performed with Receipts for January or FebruaryAccording to energy consultancy Selectra, the increase will be €4.56. In annual terms, an increase in VAT to 21% represents 90 euros more for households.

But even with such rises There is no doubt that the executive branch has implemented important tax reduction measures., especially in indirect taxes. “The highest figure in history,” according to the Ministry of Finance. Data obtained from the Department of Maria Jesús Montero show that from 2021 the overall tax reduction will reach “25 billion for citizens and companies”.

On the other hand, where mitigation measures have been much less pronounced is in Income tax. The executive branch has submitted an application discounts for people with low incomes, but in no case for average incomes. The Treasury’s refusal to adapt income tax to inflation has forced the working middle class, who are the main payers of this tax, to register double punishment. Firstly, because the salary increase they received was by no means at the level of inflation. And secondly, because, in addition to the loss of purchasing power, they had to pay more in Income tax.