MADRID (Reuters) – Spain on Wednesday extended a series of measures aimed at helping citizens cope with the high cost of living until 2024, even as the inflation rate slows.
Like other European countries, Spain has grappled with a cost-of-living crisis in the aftermath of the COVID-19 pandemic, exacerbated by the impact of the war in Ukraine on energy prices.
“This new one will serve to consolidate the progress made in the last five years,” Prime Minister Pedro Sanchez, who won a new mandate in November, told a news conference after the cabinet approved the new package.
Sanchez said the country’s gross domestic product was set to have grown by almost 2.5% this year. The government’s previous GDP growth forecast was for 2.4%.
Among the measures is an extension of subsidies for minors and young people on public transport to all regular users and an extension of VAT relief for products such as fruit and vegetables, pasta and cooking oils.
A debatable tax on the profits of electricity corporations, which generated around €3 billion in 2023, has been amended to allow corporations to offset the 1. 2% tax if they invest in renewable energy projects.
A similar levy for banks will be unchanged for 2024 following an agreement between Sanchez´s Socialists and his junior coalition partners, the hard-left Sumar party.
Some measures will be phased out.
The VAT cut on energy expenses, which reduced the rate to 5% in 2023, will slowly return to 21%, Sanchez said. The VAT rate of 21% on fuel costs will be reinstated in April, according to a source in the Ministry of Budgets. .
The tax rate on electricity will rise to 10% by 2024, the government said in a statement.
(Reporting by Belen Carreno, Inti Landauro and Pietro Lombardi; writing by David Latona; editing by Charlie Devereux, Alison Williams and Tomasz Janowski)
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