Spain to slash tax on gas as energy bills soar

Spain will temporarily slash the sales tax on gas to help consumers facing soaring bills, the prime minister said Thursday, as Russia’s war in Ukraine has sent European energy prices rising.

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Pedro Sanchez said his government will cut the value-added tax on gas to five percent from 21 percent from October until the end of December.

“As we enter autumn and winter, it seems reasonable to us to try to lower the heating bill,” Sanchez said during an interview with radio Cadena Ser.

The government may extend the measure into next year “for as long as the very difficult situation we are facing lasts,” he added.

European gas and power prices have spiked this year as Russia limits supplies, in what has been seen as retaliation to European Union sanctions over its invasion of Ukraine.

Spain’s inflation rate hit 10.4 percent in August, down for the first time in four months as fuel prices eased, but it remained high due to rising electricity and food prices.

Inflation has remained in double digits in the eurozone country since June, a level not seen since the mid-1980s.

Economy Minister Nadia Calvino said consumer prices were on a “downward slope” that will continue “over the course of the next months”.

But she called for “caution” as “uncertainty is very high due to the war”.

Sanchez’s leftist government has rolled out aid packages in recent months to help households and businesses weather the inflationary pressure, including free train travel and fuel subsidies.

Nearly 500,000 people have signed up to receive free travel on commuter trains and medium-distance trains, the government said Tuesday.

The measure came into effect on Thursday and will last until December 31.

The government has also earmarked 221 million euros ($221 million) to allow local administrations to slash the cost of monthly travel passes for the metro and buses by nearly 30 percent.