Government divided on shock plan 24 hours after verdict


Just 24 hours before the Council of Ministers, which will have to approve new shock measures to tackle inflation, the government is divided. Negotiators from the Socialist side and Podemos ended yesterday’s session without a deal. “As things stand now, we cannot support the royal decree,” Podemos sources said.

Talks will continue today, already authentically against the clock, to try to reach an agreement on a package of emergency measures that will satisfy both sides. VAT on electricity at 5% was announced by Pedro Sánchez and Podemos, although he sees it as insufficient, admits it. However, at the global level, differences remain in the rest of the measures.

The first shock plan expires at the end of the month, so it needs to be renewed. Furthermore, the government aims to not only renew, but deepen measures to combat an inflation that sustains and damages the confidence of the economy and citizens. One of the measures announced to tackle this is the reduction in VAT on electricity. The government re-evaluated the firmness of inflation, reconsidered the political impact and on Wednesday announced a tax cut it had rejected until recently. However, yesterday he acknowledged that this tax cut does not solve the problem of inflation; that it may serve to reduce trauma, but that it is necessary to move to more concrete solutions. This was acknowledged by one of the ministers who opposed the cuts the most, Teresa Ribera, the man in charge of the ecological transition.

“The problem with tax cuts is not a solution, they are short-term, emergency measures. We need to accelerate far-reaching structural changes,” Ribera said in an argument that he wanted to add to the reasons for his previous austerity, pp. Criticism because “we devote ourselves exclusively to questioning taxation and thinking that there is no limit to resources for transfer taxpayers, viewing reality as distorted” and the need for change in the medium and long term Is.

Will have to wait for new tax on power companies, it is not expected to be approved in the cabinet tomorrow

However, in the package of measures that are intended to be approved tomorrow, the short term prevails. It has been announced to reduce VAT on electricity from 10% to 5%, the extension of a 20-percent rebate on gasoline, a reduction in transportation bonuses and a 300-euro check for the most vulnerable.

So, everything was focused on a very short duration. And also, the star issue, the tax on power companies, is very green. There will be no decision on this Saturday, things are not ripe, tell various government sources. There is no political settlement, nor has the technical complexity involved been removed.

There is general agreement on taxing power companies’ extraordinary profits, but not on how to do it. “You have to be careful”, Teresa Ribera admitted in her speech at the New Economy Forum. There are two possible formulas, an increase in the corporate tax or a new tax. In any case, the path of decree law is very limited. This is not possible if you want to set up a new tax. It has to be conveyed through a law, which will take several months. At the Treasury, however, they defend that if it is approved before December 31, it could be applied to benefits received in 2022.

In the case of corporate tax hike for power companies, there is doubt whether the decree-law route is feasible. It is very mind-boggling how the Constitutional Court struck down an amendment to the installment payment of corporate tax in July 2020, which was instituted by the then Finance Minister Cristóbal Montoro in 2016. An annulment to process it through decree law.

Treasury works so surcharges on power companies cover benefits for full year 2022

On the other hand, power will drop 17% to 227 Euro MWh this Friday. This is 55 euros less than the cost without the gas cap. For their part, Fuel doesn’t give up. Petrol prices rose again yesterday and averaged 2,141 euros per liter, two cents more; And diesel rose seven cents to 2,076 euros. Filling the tank with gasoline is 1.13% more expensive tomorrow than it was a week ago, and 3.64% more expensive to do with diesel.

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