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Lawmakers keep VAT lower as Europe contends with high energy prices

Policymakers in Europe are holding off from increasing VAT rates amid inflationary pressure from high energy prices. Greece and Spain are introducing targeted measures to mitigate rising electricity costs. 

Greece: lower VAT on tourism

Greece’s Prime Minister Kyriakos Mitsotakis announced that the reduced VAT rate of 13% on tourism will be extended. 

Tourism is critical to the Greek economy. Lawmakers are looking to boost the sector with the reduced rate. The lower VAT rate also applies to soft drinks, coffee, cinemas and gyms. 

At the same time, the Greek government is concerned about rising fuel and electricity prices. In addition to extending the reduced VAT rate on specified goods, Greece is introducing specific measures designed to cushion consumers against the effects of rising energy costs.  

Spain: tax cuts on electricity 

Spain is also taking direct action against rising energy prices. In June this year, Spain announced a temporary cut on VAT on electricity. Spain reduced VAT on electricity from 10% to 21%.

Spanish Prime Minister Pedro Sanchez has announced further measures to combat rising energy prices. Sanchez also expressed concern about excessive profit taking by energy companies. 

Not just a European energy issue?

Analysts warn that the increased cost of natural gas could affect energy prices beyond Europe. Depending on weather conditions during the year’s northern hemisphere winter, energy prices could spike more broadly. 

What about green VAT?

While governments scramble to address rising energy prices, experts are also concerned about the need for green VAT and other policy measures designed to combat climate change. 

On one level, raising carbon taxes and reducing energy costs appear to be diametrically opposed. However, some experts suggest that accelerating the transition to alternative energy sources – and thus lessening the dependency on fossil fuels – is an important way to avoid future energy price shocks. 

Ensure your business adapts to changing VAT policy

Governments increasingly see VAT as a dynamic policy tool to address urgent economic and social issues. That means VAT is subject to frequent and unpredictable changes in rates and regulations.

As global compliance specialists, Vatglobal keeps your business a step ahead of VAT policy change. Our powerful VAT technology makes compliance simple and more cost-effective. And our expert team is always on hand to provide you  with insight, assistance and strategic VAT guidance.

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