Spain doubles diesel tax cut to 20 cents a litre

The Spanish government is doubling its tax cut on diesel from 10 cents a litre in August to 20 cents in September, in a bid to cushion the impact of inflation.

The tax reduction on petrol, meanwhile, is being phased out as planned, falling from 10 cents to 5 cents a litre from Tuesday.

A more than 15% rise in diesel prices in July prompted the central government to increase the tax reduction from September, when it had originally been due to fall to 5 cents a litre. 

Petrol prices rose by 7.3% in July, below the threshold set by the government's Middle East war anti-crisis package for restoring the full tax cut.

The fuel tax reduction for both petrol and diesel fell from 20 to 15 cents a litre in July and from 15 to 10 cents in August.

In September, it returns to 20 cents a litre for diesel, while the petrol reduction continues to be phased down to 5 cents.

In July, diesel prices were up 15.7% year-on-year. That was above the 15% threshold set by a government decree to mitigate the impact of the war in the Middle East, requiring the diesel tax reduction to be raised to 20 cents a litre in September.

The Spanish government extended most of the tax measures approved in March on June 29 to mitigate the effects of the Middle East crisis.

It nevertheless set out a gradual withdrawal of fuel-purchase subsidies, which were due to end entirely in October.

The restoration of the diesel subsidy comes after Spanish inflation rose by 0.7 percentage points in August to 4.3% year-on-year, its highest level since February 2023, according to the Spanish National Statistics Institute's (INE) flash estimate.