August 6, 2021

Refueling a car in Spain may soon stop paying off

Madrid government wants to raise fuel taxes to accelerate decarbonization and bring taxation closer to other European countries.

Crossing the border to refuel at cheaper prices has become a habit for many Portuguese living in the border, but it may soon stop paying off. According to a proposal now known, the Spanish government intends to impose a historic increase in fuel taxes to accelerate the decarbonization of the economy in the coming decades.

The Spanish press points to increases that could be around 20 cents, bringing the tax burden closer to that practiced in the eight main countries of the European Union on gasoline: Austria, Germany, Belgium, Denmark, Finland, France, Netherlands and Sweden, designated as EU- 8 in the Spain 2050 report. Foundations and proposals for a long-term national strategy.

If the increase indicated is confirmed, and having as references the average values ​​for the first quarter of this year, the price per liter of gasoline in Spain would be only five cents lower than that practiced in Portugal. The average for the first three months of the year for unleaded gasoline 95 at Portuguese pumps was 1.50 euros, while at Spanish service stations it stood at 1.25 euros. That is, a difference of 25 cents.

The weight of taxation also shows a great disparity between the two countries: in Portugal, taxes weigh 63.2% on the selling price to the public (PVP). In Spain, it is 55.1%, that is, eight percentage points less. Comparing with the group of eight countries identified in the report, the average weight of taxes on gasoline prices is around 63% (in Portugal it was 63.2% in the first quarter of this year).

But it is in the diesel tax that the Pedro Sánchez government wants to move first, in a war against diesel.

Diesel: minus 8 cents

On average, in Spain, diesel is 8 cents cheaper than gasoline and compared to Portugal, the difference is even greater. Once again, taking as a reference the figures for the first quarter of this year, the price of a liter of diesel on the other side of the border was 1.13 euros. In Portugal, for the same period, a liter of diesel reached 1.32 euros, in other words, 19 cents more expensive.

The document justifies this fuel taxation policy with the need to adapt to new forms of mobility in the next three decades. “There will be fewer private vehicles and more shared vehicles, more bicycles and more public transport”, indicates the document.

“Mobility will be transformed with the spread of the electric car, which will become increasingly economical and competitive, and which will constitute the bulk of the Spanish fleet by mid-century”, assuming that there will still be internal combustion vehicles, specifically for the freight and long-distance transport, but “more efficient and with less polluting fuels”.

a new tax
The document released in May also provides for the creation of a new tax on car use. Madrid intends to replace current taxes such as purchase, circulation and fuel taxes with a tax on the effective use of the vehicle that takes into account its characteristics.

PRR funds
In the Recovery and Resilience Plan, Spain set aside around 40% of the 69.5 billion euros for the green transition and Portugal 38% of the 16.6 billion euros, this being one of the large eligible areas of expenditure in the use of funds from the bazooka.