Spain extends VAT reduction on food due to persistently high prices

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VAT reduction

The Spanish government has announced that the reduction in VAT on certain basic foodstuffs will be extended. Prime Minister Pedro Sánchez indicated that this extension is necessary because the prices of these products still remain high.

The prime minister will submit the extension to the Congress of Deputies, where his government does not have a majority. He hopes that the proposal will be approved despite the major financial effort.

Necessary measure for households

Sánchez emphasised that, despite the heavy burden on the public purse, this extension is necessary to relieve the pressure on households. “Food prices remain high and that is why we have to make this huge effort, but I think it is a necessary effort for our households,” the Prime Minister said.

Current VAT reductions

In December, the government extended the VAT cut until June 30 for basic foodstuffs. This involved products such as milk, bread, eggs, cheese, fruit, vegetables, legumes, potatoes, grains and olive oil. The reduction in VAT on pasta from 10% to 5% was also extended. This extension contrasts with the previous communication to Brussels in April, which indicated that the VAT cut would be reversed on June 30.

Rising food prices

According to the latest data from the Instituto Nacional de Estadística (INE), prices of food and non-alcoholic drinks rose by 4.7% year-on-year in April. That is four tenths higher than in March. The prices of fruit and vegetables, and especially olive oil, have risen sharply. The price of olive oil has increased by 204.8% since January 2021. That means costs have tripled in the last three years.

On a monthly basis (April compared to March), the consumer price index (CPI) increased by 0.7%. This increase was driven by higher prices for clothing and footwear due to the new spring and summer collection. Rising costs for accommodation and food also contributed. The price of olive oil rose by 1.5% in April compared to the previous month.

The extension of the VAT cut comes at a crucial time for many Spanish households struggling with the rising cost of living. The government hopes this measure will provide some relief at a time of continued economic pressure.

ASSSA

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