Spain wants to increase VAT on private healthcare and private education

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healthcare and education

Spanish Vice President Yolanda Díaz has unveiled tax plans that could have a major impact on private healthcare and education in Spain.

The proposal includes an increase in VAT (IVA in Spain) on these services from 0% to 21%. This move is expected to generate more than €3 billion for the state treasury. Moreover, the negative aspects of the plan will mainly affect citizens and professionals in the sector.

Tax increase with far-reaching consequences

Díaz, the leader of the left-wing political party Sumar, believes the VAT exemption currently applicable to these two economic activities is unjust, she said in an interview with the EFE news agency, cited by El Economista. This announcement is part of the negotiations on the new general state budget. The vice president is in talks with Finance Minister María Jesús Montero about different ways to increase tax revenues. In these negotiations, the focus is now on private education and healthcare.

Impact on costs and accessibility

A sudden increase in VAT to 21% for private healthcare would lead to an increase in costs. To a greater or lesser extent, these will be passed on to the consumer. During the pandemic, the public healthcare system was already experiencing overload. And in many cases that situation has only worsened, such as with the waiting lists. A cost increase in private healthcare could lead thousands of citizens to return to public healthcare. They cannot afford the extra costs. This would result in a further burden on the public healthcare system.

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Also read: Emergency bell for Spanish healthcare: unacceptable waiting lists and too few beds

Shifting government costs

Carlos Rus, chairman of the healthcare employers’ organisation Aspe, warns of an undesirable effect of the possible measure. “The revenue that the state would generate through the increase in VAT will most likely lead to an increase in government expenditure in the medium term. “We will have to provide for additional consultations, tests and interventions that are currently being carried out in the private sector.”

Responses from the education sector

The education sector has also reacted negatively to the proposal. There are fears for the survival of the sector. The measure may lead to the loss of many jobs. Moreover, it would be a new attack on the freedom of choice of families and the creation of educational institutions, which is enshrined in Article 27 of the Spanish Constitution. Stakeholders find the measure illogical because education is seen as the “basic necessity of life”.

This fiscal measure would also have a direct impact on non-university regulated education as well as on private universities and the non-regulated education sector. There is a risk that a large part of the private education and training sector, mainly made up of small and medium-sized enterprises could disappear.

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