The

European Commission

has discouraged EU countries from

lowering VAT on gas and electricity

to cushion the rise in prices, since it understands that this is an

ineffective measure that is inconsistent

with the bloc's climate objectives.

In a

letter addressed to the Ministers of Economy and Finance

of the twenty-seven, Commissioner

Paolo Gentiloni

acknowledges that, after the entry into force on April 6 of the new rules on VAT, the Member States can decide to which products they apply rates reduced

.

But he doubts that it is the most appropriate option to face the rise in electricity and

encourages them to bet on direct aid

to households and companies and

taxes on profits that fell from the sky.

The letter from the head of Economy of the Community Executive comes in

the midst of a dispute

between the Spanish

Government

and the new leader of the Popular Party,

Alberto Núñez Feijóo,

who has been demanding Pedro Sánchez for weeks to reduce VAT on gas and electricity to 4% as soon as possible .

Currently,

VAT on gas and electricity is at 10%

, following the decision made by the Executive in June of last year, which has been extended on several occasions, the last one in March until June 30 of this year.

In this context, the Italian writes that reducing taxes on energy is something "easy to apply", and that is "probably" the reason why the measure was adopted in the first weeks and months of the crisis, but adds that "

the benefit to businesses and consumers is uncertain

" if high prices are "persistent".

"VAT rate cuts, in particular, have

a poor track record in translating into lower prices

because tax cuts can be offset by higher rates from energy providers," Gentiloni explains, adding that in such cases households they may find themselves in a situation where they do not benefit from lower taxes and continue to "suffer" from higher prices".

temporary measures

On the other hand, the Commissioner for the Economy underlines that the response to the situation must be "coherent" with the

bloc's

climate objectives

for 2030 and 2050, the year in which the European club wants to have completed the transition to an economy free of carbon emissions. greenhouse gases.

Achieving those goals requires that

tax relief measures for fossil fuels be temporary

and focused on making energy products for businesses and households affordable while prices are high."

Finally, from the point of view of "equity" and social equality, Gentiloni points out that "

lowering indirect taxation is not necessarily the most effective solution

" to guarantee that energy products are affordable for the population and the business fabric.

Instead, it notes that raising more revenue from

energy taxes on the "unusual profits" of energy companies

"can help fund targeted aid for vulnerable households and businesses, or for specific categories of transport users in a fairer and more sustainable way." ".

"Depending on national preferences, this can be done in the form of

checks

or

refunds

, taking into account the regressive impact of the escalation in energy prices," he recommends.

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  • Pedro Sanchez

  • Alberto Nunez Feijoo

  • PP

  • European Comission

  • Taxes