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Spain will scrap reduced VAT on food this summer
Grocery prices are likely to rise across Spain when this crisis measure is eliminated
The Spanish government has confirmed that it will end the reduced VAT rate on certain staple grocery items on June 30, a measure which was introduced last year to ease the burden on shopper’s pockets as food inflation soared.
In December, the government extended the 0% VAT rate on certain basic items like milk, bread, eggs, cheese, fruit, cereals and vegetables, as well as olive oil. Likewise, the tax reduction from 10% to 5% was also maintained on pasta for a further six months.
But with the economy stabilising, the administration has confirmed to Brussels that it will begin to “progressively” eliminate all of these crisis measures.
Along the same lines, a statement released this week indicated that the Special Tax on Electricity will also be gradually recovered until it reaches its normal rate at the end of June. The same will happen with the Tax on the Value of Electrical Energy Production, "whose exemption will progressively disappear throughout the year.
While those making the decisions don’t foresee a huge impact on the average consumer, most households will tend to disagree, since the cost of many everyday grocery items continues to climb.
Throughout 2023, food prices registered increases of close to 20%, exceeding 70% in the case of olive oil, and many products have become luxury items for some shoppers.
At the end of last year, inflation did indeed begin to stabilise, but the general cost of living in Spain is still 3.2% more expensive than it was in 2022.
Even while the reduced VAT rate has been in place, the food sector is one of the most affected by inflation. These increasing prices are partly due to rising production costs, and partly to a shortage of supply due to the war in Ukraine, as well as reduced harvests as a result of drought and high temperatures.
Image: Freepik
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