CUTTING value-added tax on basic foodstuffs has already borne fruit for households in Spain, and the move will continue for at least the first six months of 2023, the national government confirms.
Spain's government slashes tax on basic food items (photo: Flickr)
From Sunday (January 1), IVA – as this tax is known in mainland Spain and the Balearic Islands – is no longer charged on milk, bread, cheese, eggs, fruit, vegetables, cereals and pulses, which previously attracted the lowest rate of 4%.
Middle-rate IVA, currently 10%, which normally applies to pasta and cooking oil, has been reduced to 5% for these goods.
Consumers remain sceptical, saying they expect supermarkets will simply raise their prices and the public will not benefit from the tax cut, but the government says this will not be allowed.
Stores are not permitted to take advantage of lower IVA to charge more and increase their profits.
Supermarket bosses stress that the IVA element is only a small part of the end price, meaning it is not clear whether costs to customers will continue to soar.
Depending upon the goods in question, price tags have risen by anything from 10% to 100% - as an example, stores' own-brand milk has gone up by 61%, from approximately 57 cents a litre to 93 cents.
National authorities say groceries affected by the IVA reduction must not go up in price for four months, although it is unclear whether this period will be extended to include the whole six months of reduced value-added tax, nor whether the IVA cut will go on for longer.
Major supermarket chains say the actual impact on home finances through lower IVA will depend upon the type of goods individual customers typically buy, although the Association of Finance Consumers in Spain (ASUFIN) has carried out research to try to predict the levels of savings possible.
Read more at thinkSPAIN.com