Canary Islands transport companies accept 99.9% drop in fuel tax to avoid strike

The Ministry of Finance of the Canary Islands Government has confirmed that the Treasury will return 99.9% of fuel tax to the transport and agricultural sector until July 31st, backdated to March 1^st, to ease pressure during price increases and prevent a local strike off the back of the one in mainland Spain.

This was agreed on Thursday in the Governing Council meeting, but the amount was only confirmed yesterday as the Ministry of Finance needed 24 hours to make the appropriate calculations.

According to the forecasts of the 2022 budget, the Canary Islands Government expected to collect 301 million euros this year through the fuel tax, of which five months worth (approx 130 million euros) will be returned.

The Minister of Finance, Román Rodríguez, said that “the refund of 99.9% of fuel tax to these sectors is an exceptional measure that is adopted to alleviate production costs due to the increase in fuel prices. With this, the Special Tax on Fuels Derived from Petroleum for professional carriers is ‘de facto eliminated’, which until now represented half of what was applied in the rest of the State and, of that half, they only had to pay 32% of the same, since the other 68% was returned by the Canarian Government.”

Since the IGIC on fuel is taxed at type 0, this means that carriers will not be taxed at all, while in the other regions of Spain a VAT of 21% is applied. The return "constitutes an element that technically should have a positive impact on consumer prices and should be accompanied by a containment of the same in the benefited sectors." The partial refund of the Tax is included in its own regulatory law, which dates from July 1986.

It specifies that transport and agricultural companies will be entitled to a partial refund of the tax levied on petrol and diesel for professional use by vehicles for the development of agricultural, livestock, and transportation activities (discretionary and regular passenger, of goods and taxi drivers) and whose data is duly registered in the Census of Farmers and Carriers.

The tax is currently 26.5 cents per litre on petrol and 22.2 cents on diesel, and the Government has returned 68% of these amounts to them since 1986, a return that will now be 99.9% until July 31^st.