The Government will approve this Tuesday the third anti-crisis plan, with measures to curb the price of food

by time news

The Council of Ministers will approve this Tuesday, December 27 the third aid package to alleviate the economic and social consequences from war in Ukraine. It will enter into force on January 1 and will include measures to deal with theescalating food prices.

After what will be the last meeting of the Council of Ministers in 2022, the Prime Minister, Pedro Sánchez, is scheduled to appear before the media to explain the package of anti-crisis measures and to take stock of a year marked by the war initiated by Vladimir Putin in Ukraine and by the scale, at historical levels, of prices after the outbreak of the conflict.

Despite the fact that in recent months Spain has managed to moderate the rise in prices and it is already the country with the lowest level of inflation in the euro zone, the Executive has decided to promote a third support package to deal with the current situation which will include the extension of some measures currently in force that expire on December 31 and other new ones related, mainly, to the shopping basket.

In addition, Pedro Sánchez advanced a few days ago that this new package of measures will also include support for the gas-intensive and ceramics industry.

Reduction of the VAT of the shopping basket

One of the new initiatives that is gathering momentum to be included in the decree-law that will be approved by the Council of Ministers next Tuesday is the reduction of VAT on certain products in the shopping basket with the aim of cushioning the impact of the rise in inflation.

Sources familiar with the negotiations have told Europa Press that all possibilities are open, although the one that, apparently, has the most options to go ahead is the VAT reduction in some foods that have a tax of 10%, including fish, which could drop to 4%.

VAT on food in Spain varies between the reduced rate (10%) and the super reduced rate (4%). Food products are those that can be used as food for humans or animals.

All these products are subject to 10% VAT except for those that are considered essential foods, such as milk, eggs, fruit and vegetables, bread and legumes, which are taxed at the super-reduced rate of 4% and cannot benefit from a lower rate, unless the Government decided to eliminate VAT for these products.

However, there are certain foods that do not fit into any of these categories, such as sugary or alcoholic drinks, to which the general VAT rate of 21% applies.

In addition to the reduction in VAT, the leader of Podemos, Ione Belarra, advanced a few days ago that her party is negotiating with the PSOE, within the extension of the anti-crisis measures decree, an aid check of around 300 euros to ease the cost of the shopping basket that will benefit around eight million people.

Extension of other measures

Although the Executive has considered almost no extension measures in the General State Budgets (PGE) of 2023 to respond to the consequences of the war in Ukraine, sources in the Ministry of Finance assume that there will be to extend “many measures” currently in force.

The only exception that is included in next year’s public accounts is the free Commuter and Medium Distance tickets for frequent travelers, which will amount to around 660 million euros over the course of the year.

Among the measures that have already been confirmed to be extended, the 2% limit stands out for the update of rental income and the 15% increase in non-contributory pensions after the Government’s agreement with EH Bildu for get their support for the General State Budgets (PGE) of 2023.

In fiscal matters, the Government promoted a battery of measures aimed at containing the rise in electricity bill prices. Highlights include the reduction of VAT on electricity receipts from 10% to 5%, which applies to consumers, companies or individuals, with a contracted power of up to 10 kilowatts, the application of the tax rate of 0.5 % of the special tax on electricity and the extension of the temporary suspension of the tax on the value of the production of electrical energy.

All these tax rebates aimed at moderating increases in the price of electricity meant between January and October a decrease in tax revenues compared to last year of 6,436 million, according to the latest data updated by the Tax Agency in its monthly report of collection

It should also be remembered that in the second package of measures, approved in June, the Government included the transitory increase of 15% of the minimum vital income, the prohibition of the suspension of the supply of electricity, gas and water, a direct aid of 200 euros for salaried, self-employed and unemployed registered in the employment offices who live in households with an income of less than 14,000 euros and the freezing of the price maximum of the butane cylinder until the end of the year at 19.55 euros.

What will happen to the fuel allowance?

One of the most questioned measures is the extension of the bonus of 20 cents per liter of fuel. Although the Government has not made it completely clear what will happen with this discount, the First Vice-President and Minister of Economic Affairs and Digital Transformation, Nadia Calviño, has recognized that it is a controversial measure due to its fiscal impact and because it benefits who has a car, not the most vulnerable classes.

In addition, Calviño has pointed out that this discount has been a “very questionable” measure because it does not encourage savings in fuel consumption and has contrasted it with the bonus for public transport – commuter and medium-distance trains for recurring passengers –, qualified as a “star” tool, which is why it will be extended during all year 2023.

For this reason, the economic manager of the Government has opened the door to “focusing it on the sectors that can be most affected”, among which she has mentioned transport, agriculture, livestock and fishing. “What we are looking at is whether this bonus can be removed for everyone and maintained only in the sectors for which it is necessary», he said recently.

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