To what extent are Spanish supermarkets complying with the VAT reduction?

by Lorraine Williamson
zero VAT in supermarkets on some foods

MADRID Some products in Spanish supermarkets that since the beginning of this year have been exempt from VAT have become cheaper. These are basic products in the shopping basket such as tomatoes, lentils, potatoes and cheese. 

Until December 31, 2022, these products were subject to 4% VAT (IVA in Spain). However, this tax disappeared on 1 January. That of pasta and oil was reduced by half from 10% to 5%. With this measure, the Spanish government wants to help consumers in Spain cope with inflation. 

Related: As of 1 January, VAT will temporarily not apply to these foodstuffs in Spain 

Moderate target range 

The data for December shows the annual increase in inflation has moderated to 5.8%. However, prices of groceries continue to rise unbridled (15.3% in November). The government’s target seems to have been moderately achieved in the first days of the application of the measure for the main brands. Reductions of about 4% in the prices of these products have been recorded. This is evident from the data of price comparison of 13 basic products conducted by El País between December 28 and Monday, January 2. 

Which supermarkets? 

The full picture is much more complex. After all, the measure affects thousands of products in tens of thousands of stores. The current scenario is based on prices in the online stores of Mercadona, Carrefour, Día, Alcampo, Eroski and Consum on the first working day after the VAT reduction or abolition. Lidl completes the group of large supermarkets in Spain. However, its prices have not been analysed because it does not sell food online. Most of the foods chosen are from white brands. 

The general trend is a reduction in prices 

The general trend observed is the reduction in prices, with a few exceptions: in Mercadona, a kilo of lentils cost €2.08 on December 28 and €2.00 on Monday, which is 3.85% less; in Carrefour, a litre carton of whole milk has gone from €0.94 to €0.90, 4.26% less; and at Eroski, the pear-shaped tomato now costs €1.97 per kilo, 3.9% less than at the end of December. In these three cases, the supermarket has reduced prices by about 4%, which corresponds to the amount of VAT. 

El País compares the prices of December 28 with those of January 2. For 53 of the 78 products analysed, the price has fallen by the same amount as the VAT. However, for eight prices the fall was less than that of the tax and for 14 products greater than the levy paid until January 31. The final price of three products has increased. Read the full article in El País for the exact results. 

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How are the supermarkets doing? 

In summary, it is concluded Mercadona passes on the reduction in the IVA well in the final price for consumers. Carrefour does it differently. Of the 13 products analysed, 5 remain at the same price as before the tax cut. Five products are even cheaper than before the tax reduction and for 3 products the price has been adjusted exactly in line with the tax reduction. 

Día increases the price of 4 producers compared to before the tax cut and the remaining 7 products have been reduced in line with the IVA cut. Eroski also neatly calculates the tax reduction. Three products are even cheaper than before the VAT reduction. At Alcampo, 2 products have become more expensive, 4 cheaper and for the remaining 7, the VAT reduction has been properly passed on in the final price. At Consum, only iceberg lettuce is cheaper than before the VAT reduction. The tax reduction has been implemented for the other 12 products. 

Consumers hardly notice 

According to El País, consumers hardly notice the reduction. Those few cents do not make enough of the total amount of groceries they do. If other products become 20 cents more expensive all at once, you will not feel a 3 cent reduction in a few basic products. 

Consumer organisation welcomes measure 

Nevertheless, the Organisation of Consumers and Users (OCU) welcomes the measure. “It seems to us to be an adequate policy, but it falls short. Fish and meat should also have been included,” says Enrique García, OCU spokesperson. “However,” he continues, “we find it very necessary to monitor how prices evolve. It makes no sense that they are down today and in two or three weeks they will be back to the price they had in December. There has to be constant monitoring.” 

No abuse 

Ignacio García Magarzo, General Manager of Asedas (Spanish Association of Distributors, Supermarkets and Supermarkets), assures that the sector will not take advantage of the situation to raise prices unnecessarily: “The best guarantee that this will not happen is the strong competition there is and the ability of consumers to choose. We are an industry with very tight margins and at the same time, we are aware of the sensitivity that exists. 

Related: Spain wants to contain food prices with a support package 

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