Several CCAA warn of the loss of income by lowering VAT due to inflation

The measures that the Government has implemented to alleviate the inflation that destabilized world economies after the start of the war in Ukraine have not been welcomed by some regional governments. Several communities have warned, with greater emphasis those governed by the PP, of the loss of income that the reductions in VAT approved by the Government will mean to alleviate the rise in prices, something that both the Ministry of Finance and, in general, reject , the autonomies with a socialist president.

Sources from the Ministry of Finance have assured EFE that “the effect on the regional coffers of the VAT reduction in 2023 -half of the collection of which goes to the autonomous regions- is null”, since for this year the deliveries on account are already calculated and approved, and they have affirmed that up to now there is no evidence that any community has requested any compensation for an alleged loss of income for this concept.

The alarm was raised by the Junta de Castilla y León on December 29, two days after the Prime Minister, Pedro Sánchez, announced a six-month reduction in VAT on food, which will be reduced from 4% to 0% on basic necessities and from 10% to 5% for oils and pasta.

In the press conference after the Government Council of his community, the spokesman for the Junta de Castilla y León and the Minister of Economy and Finance, Carlos Fernández Carriedo, pointed out that the VAT reduction on some foods announced by the Government, added to others such as the electricity tax, will leave the region without 265 million euros that it had in the recently approved budget. Subsequently, the Board explained to EFE that these 265 million correspond to VAT reductions for electricity (80 million), gas (15), food (40) and electricity tax (130 million).

The Madrid president, Isabel Díaz Ayuso, stressed during her year balance speech that the VAT reduction “affects the autonomous communities” and estimated that her region “will contribute almost 500 million euros.” “We agree that taxes should be lowered, but the Prime Minister should warn that we are all making this effort,” she said. According to sources from the Ministry of Finance have transferred to EFE, the calculation for the year would be close to 470 million euros: 130 due to the reduction due to electricity tax; 120 for electricity VAT; 80 for gas and 140 for food.

For its part, the Junta de Andalucía has estimated that the Government’s measures will mean a loss of income of 448 million euros if it is maintained throughout the year. Sources from the Andalusian Executive have explained to EFE that the impact of these almost 450 million in the Andalusian accounts is an estimate of the technical services of the Ministry of Economy, Finance and European Funds, but the exact figure will have to be transferred by the Government to the communities in a Fiscal and Financial Policy Council.

The president of the Board, Juanma Moreno, recalled that in March the Government would already perform the lowering of the VAT on basic products and would suspect that the correct course would have been the convening of a Fiscal and Financial Policy Council to address the matter and go all “by the hand”

Assumes a “shared effort”

In the case of Galicia, the Xunta has not provided a calculation in this regard, but its president, Alfonso Rueda, said at a press conference after a Council meeting that this tax reduction represents a “shared effort”, since the communities also will stop collecting, and regretted that there had not been a prior dialogue to adopt this measure.

Some communities governed by the PSOE have also requested their calculations, such as Navarra, which has estimated the impact on the Foral Treasury of the fiscal measures approved by the central government at the end of the year at 105.88 million.

Of that amount, 10.5 million correspond to the reduction of VAT on staple foods, while fiscal measures in energy matters concern 12.85 million for the reduction of VAT on gas; 42 for the extension of the VAT reduction on electricity; 18.65 for the extension of the reduced rate of the Tax on electricity and 21.89 for the suppression of the installment payments of the Tax on the Value of the Production of Electric Power (IVPEE).

In turn, the Junta de Extremadura has calculated the impact on its regional accounts of the VAT reduction on some foods announced by the Government at approximately 15 million euros, added to others such as the electricity tax. However, the Government of Extremadura considers that, since VAT is a ceded tax, but whose collection is carried out at the national level by the Tax Agency, “it is difficult to establish a quantification”, and has indicated that depending on the collection impact and in relation to the Territorialized Distribution Index, it can be determined in a more concrete way.

In similar terms, other executives with a socialist president, such as the Aragonese, have expressed to EFE that the VAT condition, if it exists, “will not affect this year, because VAT is part of deliveries on account, which They were closed last summer.”

2025, when the collection is actually known and the timely settlement for 2023 is made.

The Balearic Government has not made any estimate of what measure will affect its accounts, tax reductions and sources from the Ministry of Finance have pointed out that VAT is settled through the regional financing system two years late, so the communities receive in 2023 come from the collection of 2021.

In Castilla-La Mancha, the regional government has told EFE that it is waiting for the Fiscal and Financial Policy Council to be convened to assess the effect of the measure on the collection of the autonomous communities and to analyze its compensation, while The Government of La Rioja has stressed that it supports the measures of the Government of Spain and that it does not plan to request compensation.

A particular case is that of the Canary Islands, which does not have VAT but rather IGIC (Canary Islands Indirect General Tax), which the insular Government already reduced 10 years ago to 0% for food and basic necessities and fuel and in 2019 also to 0% in electricity for private consumers and small businesses and 3% for large businesses. The Catalan and Valencian Generalitat and the governments of Murcia and the Basque Country have not provided any estimate.

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