Brussels Warned Spain In May About The High Taxation Of Electricity

A matter of taxes. One of the main reasons behind the high electricity bill paid in Spain lies in the tax burden. Energy cost accounts for 27% of residential customers’ bill, while non-utility costs, such as taxes and surcharges, account for almost 60% of bill. In fact, taxes only represent around 33% of the bill and this year the State will collect about 8,500 million euros for all these items, about 2,150 million more than what was paid in 2020.

Brussels thus transmitted it to the Government last May, when after several questions in the European Parliament about the possibility of establishing price caps , as proposed by Podemos with nuclear and hydroelectric energy, the Energy Commissioner, Kadri Simson, showed his opposition.

“The Spanish special tax on domestic electricity consumption is well above the European Union minimum established by the Energy Tax Directive,” he said.

Limit prices
Podemos continues to insist, but has already warned that “although regulatory oversight is essential for the functioning of energy markets, wholesale price limits are contrary to the design of the EU electricity market.”

According to Simson, “the best way to keep all consumers’ electricity bills low is to ensure that the overall system design is efficient.”

The special manufacturing tax marked by the Ministry of Industry, such as gasoline or tobacco, appears on all electricity bills, regardless of your electricity rate or company, and corresponds to 5.113% of the power and consumption term .

But it is that the light also supports a 21% VAT , which is applied on the total bill, including the tax on electricity, and a 7% on generation. In the first case, last June, the Government approved as a matter of urgency the reduction of VAT to 10% until the end of the year for all consumers with contracted power up to 10 kilowatts (kW), provided that the average monthly price of the wholesale market of electricity is above 45 euros per megawatt hour (MWh) and the second there was a suspension during the third quarter.

In the May response, the Commissioner recalled that “Member States are free to determine the rates of excise duty above the minimum set, based on their own national needs”, but noted that “with regard to value tax added (VAT), Spain can apply a reduced rate to electricity supplied to households “.

For the commissioner, “ensuring that the overall design of the system is efficient and that there are key safeguards for consumers is the best way to keep electricity bills low for all consumers.”

VAT, among the highest
Despite the temporary reduction, the VAT paid in Spain for electricity is very far from the tax rate in Greece (6%), United Kingdom (5% for domestic consumers), Malta (5%), Italy (10% ), Ireland (13.5%), Luxembourg (8%) or France (5.5% for the fixed part and 20% for the variable part), in addition to Portugal, which has lowered VAT for the first 100 kW / h consumption at 6% and the rest remain at 23%. Spain is in the high range, only behind countries such as Hungary (27%), Denmark (25%), Croatia (25%) or Sweden (25%).

But it is that, in addition, it is necessary to take into account indirect taxes, such as the hydraulic canon, of 25%, or the rates that the nuclear power company supports . The tax burden on nuclear power plants has increased by 430% since 2008, which has led to a critical situation. In addition to the fee for the financing of Enresa ?? which collects, treats, conditions and stores radioactive waste ??, there is a tax on nuclear fuel, and other local taxes.

In 2020, 61% of the turnover of nuclear power plants was dedicated to the payment of taxes and fees, a drastic increase if we compare it with the previous year, when this percentage was 40%.

CO2 emission rights
Thus, since the end of last year and, especially, since March 2021, the increase in natural gas prices in international markets and in CO2 prices has caused a strong increase in the price of electricity, which, according to the experts, it could go to more during the fall.

In May, when the Energy Commissioner warned the Government, the price had risen to 67.12 euros per megawatt hour (MWh), but since then it has not stopped increasing. The average price of electricity in the wholesale market reached its historical maximum on Wednesday: 122.76 euros MWh .

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