VAT reduction on essential products in Spain has hardly any effect

by Lorraine Williamson
VAT reduction

MADRID – The Spanish government wanted to meet the consumer plagued by many price increases with the VAT reduction on essential products in the supermarket. Only now it appears that many of the products that were reduced in price at the time are now more expensive than before. 

According to a FACUA study, the results of which were published by Cadena SER, one in three products for which VAT was reduced in January is already more expensive than before the reduction. Also, there are many instances where the price has returned to exactly the same starting point as it was in December. 

From suspicions to data 

The ‘yo-yo’ effect of VAT is being fulfilled cent by cent on many products in all major supermarkets. One in three products affected by the government’s VAT reduction is already more expensive than before its implementation. This is reflected in the data published this Friday by FACUA. After monitoring more than 1,000 food prices, the organisation has recorded an increase of almost one in three compared to the price on December 30. 

Most price increases in Hipercor, Lidl and Carrefour 

The largest number of anomalies of this type – which, as FACUA points out, are illegal – are detected in Hipercor, followed by Lidl and Carrefour. In the latter, 65 of the 172 prices analysed have increased in price. 

FACUA collects several examples in which the ‘yo-yo’ effect is fulfilled to the penny: The largest price increases in the past month were found in fruit or vegetables. At Mercadona, a net of 2 kilos of onions has increased from €2.39 in January (already with a VAT reduction applied) to €3.99 in March. This amounts to a whapping cost increase of 66.9%. 

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Related post: Food prices in Spain rose again by 16.6% in February 

At Día, the price of 3 kilo of washed potatoes has also increased. This time, by 46.5%, from €2.88 in January to the current €4.22. In Hipercor, there is the case of ‘Brillante Sabroz’ rice of one kilo, the current price of which is €2.79, while it was €1.82 when the VAT reduction entered into force (53.3% increase). 

Complaints without a response from FACUA 

These price increases were able to take place despite the fact that the Royal Decree-Law of the end of December prohibits all members in the production, distribution or consumption chain from applying increases in operating profit margins. 

With this data on the table, FACUA has expanded the charges it filed with the National Markets and Competition Commission (CNMC) in both January and February. However, no response has been received to date. Furthermore, the complaints are directed against all the investigated chains: Alcampo, Aldi, Carrefour, Dia, Eroski, Lidl, Hipercor and Mercadona. 

Related post: Which Spanish supermarkets do not comply with the VAT reduction? 

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