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VAT reduction on food saves shoppers in Spain 254 million
This tax cut was applied in Spain in January and is due to expire on June 30
Despite some initial misgivings, the VAT reduction the Spanish government applied to basic food items at the beginning of the year to alleviate the effects of inflation appears to working, and a report from the Tax Agency shows that shoppers saved a staggering 245 million euros between January and April.
The measure completely eliminated VAT on essentials like bread, milk, fruit and vegetables and reduced the tax rate on staples such as oil and pasta from 10% to just 5%. It was originally put in place until June 30, and the government is remaining tight-lipped on whether or not it will be extended past this date.
While the average consumer is still undoubtedly feeling the pinch, Spain now has the lowest inflation rate in Europe, and the Ministry of Economic Affairs partly attributes this to the falling food prices.
The VAT reduction on gas has also had a positive impact, resulting in a saving of 102 million euros in the first four months of the year. However, with energy prices continuing to fall across the board, it remains to be seen if the Spanish government will choose to scrap this tax cut.
A particularly successful initiative, according to the Agency’s report, has been the reduction of personal income tax for low earners, a measure that has allowed workers in Spain to save 215 million so far in 2023, particularly helping pensioners and staff in smaller companies.
Image: Freepik
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