El Salvador will reduce VAT on fuels

SAN SALVADOR (AP) — President Nayib Bukele announced Monday the reduction of value-added tax on fuels, another measure by his government to try to alleviate the economic crisis that is hitting El Salvador.

On the initiative of the president, Congress recently approved the three-month suspension of the collection of two fuel taxes, resulting in a reduction of 28 cents in the price of a gallon. These two levies were used to pay the pensions of war veterans and the public transport subsidy.

“But global inflation remains unstoppable, so I sent (to Congress) an initiative to remove most of the VAT on fuels in order to keep prices down,” Bukele said on Twitter.

In El Salvador, consumers pay 13% tax for every gallon they buy. This tax is percentage and applies to each gallon of fuel, regardless of whether it is gasoline or diesel.

As a result of the high international price of oil, the Ministry of Economy announced that starting Tuesday fuels will rise between 32 and 43 cents nationally.

Bukele said that if Congress approves this new reform, the reduced price will return on Wednesday, so the market price increase will only take effect on Tuesday. The president urged businessmen not to transfer the increase to their customers, but he also sent a message to consumers: “Today's reduced price returns on Wednesday, so don't put gas tomorrow. Play today or from Wednesday onwards.”

To alleviate the economic crisis that has been accentuated by Russia's invasion of Ukraine, the unicameral Congress approved the suspension and two taxes on fuel. In addition, the payment of tariffs on 20 products, including cereals, oils, butters, wheat cereal, fruits and vegetables, and animal feed, was abolished for one year.

An intensive monitoring campaign is being carried out to prevent public transport from increasing fares, and the permits for lines have already been suspended for 293 units, and the arrest of a businessman and several drivers who increased fares were ordered to be arrested.

In a recent message to the nation, Bukele said that, due to the pandemic, the supply chain crisis worsened last year and all products rose in price, and assured that “this year we have had the highest inflation in decades.”

The president emphasized that the crisis facing El Salvador does not originate in the country, but is global and has been aggravated by the conflict in Ukraine.

“We are not at war, we have nothing to do with war. However, we are going to have to pay for it,” he said.

According to Bukele, “the conflict between Russia, Ukraine and NATO” affects the price of oil, electricity, natural gas, propane gas and fertilizers and, as a result, the price of certain foods.