Belgium to cut VAT in response to energy price spike

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BRUSSELS, Feb 1 (Reuters) - Belgium will cut value added tax on electricity as part of a package to shield consumers from rising energy prices, the prime minister said on Tuesday.

European gas and power prices have spiked this year as economies recover from the impact of the COVID pandemic, contributing to higher bills and inflating the price of many goods.

"It is a difficult situation, the government has shown that it can take balanced measures that respond to realities on the ground," prime minister Alexander De Croo told a news conference.

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With talks dragging until early hours of the night, the government decided on Tuesday to cut value added tax on electricity from 21% to 6% from March 1 until July 1, to give a 100 euros cheque to Belgians and to extend the social price rate.

The energy package should amount to 1.1 billion euros ($1.24 billion), according to energy minister Tinne Van der Straeten, an average reduction for households of 165 euros.

Most of the European Union's 27 countries have drawn up measures to cushion consumers from high energy prices. Bugaria froze regulated heat and power prices until end-March, Spain and France capped energy bill increases, while countries including Sweden have offered compensation to worst-hit households. read more

Tuesday's move came after weeks of discussions inside the divided Belgian government over how to support consumers with soaring energy bills.

($1 = 0.8883 euros)

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Reporting by Marine Strauss, Editing by Louise Heavens

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