The IMF amends Spain's policy against inflation: asks for aid to the vulnerable, not to cap prices and avoid general measures

The

(IMF) published on Tuesday its

and, specifically, the fiscal policy guidelines that governments must follow to combat the effects of rising

and

prices on the economy and the society.

to date and, in many cases, even go in the opposite direction.

"

plays a crucial role in

Governments must strike a balance between ensuring access to energy and food,

after the unprecedented expansion they carried out in 2020 and

", points out the institution headed

Although it contemplates specific circumstances for each country, it includes the councils in three groups based on the level of development and the coverage of its social protection system.

Spain

would be among the countries with a

, to which the IMF recommends

specific guidelines that have not been met in our country.

In the first place, they ask that the countries

and that the increases in the international market be transferred to the internal market.

This means, in practice, that

, such as the one that the Executive intends to apply in our country on the price of

.

“Countries must allow the increase in international fuel prices to be fully transmitted to domestic users.

to induce demand responses. In the case of energy, the demand response can be (...) In contrast, food is a staple that takes a larger fraction of the income of the poor and may be less price elastic, therefore

especially when food security is a concern," they explain.

In his opinion, high energy prices will encourage "

" and

, both of which are desirable.

"Measures aimed at preventing domestic prices from adjusting are costly, displace productive spending and reduce incentives for producers," he maintains.

Second, they believe that countries should provide

, temporarily, in the form of transfers

, a request that is in line with others that have been launched by organizations such as the Economic and Social Council.

The Government, for the moment, has not announced any subsidy of this type to alleviate the impact of inflation on the most vulnerable families.

"Countries with strong social safety nets could use

to mitigate the impact on

. They can identify eligible households to better target aid and deliver it efficiently (. ..)", they point out.

They also warn that it is preferable that this aid is not proportional to their level of energy or food consumption, to prevent the measure from distorting their behavior and, with it, prices.

They further suggest that governments grant "

" to the most vulnerable households.

Avoid coffee for everyone

The third piece of advice from the IMF is that countries avoid generalized aid for the entire population, as could be the case of Spain with the

that has been in force since April 1, and that benefits equally to high and low incomes.

"By crossing information on household income with information on their bills, governments can offer

those

. These fixed benefits are

to benefits proportional to bills ."

, since they are

", they point out.

Only if the social protection systems are not enough, the IMF recommends smoothing the energy consumption bill or applying discounts, but in both cases it proposes

This body is not in favor of

In Spain, the 7% tax on cogeneration is suspended, the VAT tax rate on electricity for consumers with less than 10 kW of contracted power was lowered to 10%, and the Special Tax on electricity was cut to 0.5%. Electricity, the minimum authorized by the EU.

All these measures will be in force until the 30th of this month and could be extended during the summer.

"In general,

. Given the prevalence of ad valorem taxes (such as VAT or excise duties), rising prices and relatively lower demand elasticity imply that In many countries

. These additional tax revenues

."

Despite the fact that the opposition has asked the Government to

, there have been no measures in this regard for the moment and

because they are not progressive and would cut State revenue.

"

including the most affluent households, and supposes the

when it is most needed", they stress, in addition to believing that in order to continue combating the negative effects of pollution generated by the fuel use, fuel taxes must continue to rise.

Finally, the IMF is also opposed to applying taxes on

which in Spain have been

for hydraulic, nuclear and wind power plants from before 2013.

"The increase in energy prices and the profits of some energy companies has led to new calls for taxes on profits fallen from the sky. However,

, "warns the IMF.

In addition, they ask that countries use

and

to ensure global energy and food supplies.

Examples of good and bad practices

The IMF reviews in its report the measures that have been approved in some countries to contain the impact of inflation in a focused way to

This is the case of

, which has approved a

(20 euros) and

(50 euros);

or from

where a one-time payment to vulnerable families of

and other one-time payments to

have been approved .

In the

, unconditional cash transfers of 500 pesos (about 9 euros) per month have been announced to

(about

) for six months starting in April 2022;

while

has approved means-

(from 400 to 1,438 zlotys; 88 to 314 euros per household) for

, in order to offset rising energy prices.

On the income side,

in the most advanced economies are generally

the IMF recommendations, as is the case in Spain.

For example, there have been reductions in VAT in

or

or in excise duties in

,

and

.

France

has given

to reduce gasoline prices;

have announced measures to

and

, which has announced that it will raise the income threshold

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