Factsheet for measure
ES-2023-1/3040
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Updated
– measures in Spain
Abolition of VAT on certain foodstuffs
Supresión del IVA de algunos alimentos (productos frescos) (Real Decreto-ley 20/2022)
Background information
In recent months, energy prices have been moderating, being replaced as a factor in the increase in the general price levels by other fundamental goods such as food, raw materials and intermediate goods. This price increase, which is mainly explained by the impact of the war on global supply and production chains and by previous increases in energy prices, is particularly relevant in food, with staple products such as flour, butter and sugar experiencing increases of close to 40% year-on-year.
The uncertainty linked to the duration of the war and the persistence of upward pressures on food, commodity and intermediate goods prices continues to affect the European and global economy as a whole. With Royal Decree-Law 20/2022, a new package of measures is adopted, mobilising some €10 billion of public resources, to articulate the economic policy response to the war in Ukraine as of 1 January 2023, adapting it to the current context of inflation.
Content of measure
In order to contain the increase in food prices, VAT is abolished on fresh products that were already at a reduced rate, and that of oil and pasta is reduced from 10% to 5%. This makes it possible to reduce the price of basic and staple foods, such as bread, milk and fruit and vegetables. The aim is to alleviate the situation of families, especially those on low incomes who spend a larger part of their income on these goods. This tax cut will be maintained until 30 June or until underlying inflation falls below 5.5%.
The reduction in the tax rate will benefit the consumer in its entirety, without the amount of the reduction being used in whole or in part to increase corporate profit margins, thereby increasing prices in the chain of production, distribution or consumption of products.
Updates
The following updates to this measure have been made after it came into effect.
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28 June 2023
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With the approval of Royal Decree-Law 5/2023 of 28 June adopting and extending certain measures in response to the economic and social consequences of the war in Ukraine, the Spanish government extended the VAT discount/abolition on foodstuffs until the end of the year (31 December 2023).
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Use of measure
There is no estimate of the number of users. Any person buying products with reduced VAT should benefit from this measure (via reduced prices).
Target groups
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Workers
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Businesses
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Citizens
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Does not apply to workers
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Does not apply to businesses
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Applies to all citizens
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Actors and funding
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Actors
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Funding
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National government
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National funds
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Social partners
Social partners' role in
designing the measure
and form of involvement:
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Trade unions
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Employers' organisations
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Role
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No involvement
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No involvement
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Form
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Not applicable
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Not applicable
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Social partners' role in the
implementation, monitoring and assessment phase:
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No involvement
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Main level of involvement: N/A
Involvement
Social partners do not take part in the design and approval of these measures (they are not even consulted).The trade union UGT (Unión General de Trabajadores) has called for "participation" in new reissues of these aid packages in order to contribute ideas that will benefit working people.
Views and reactions
In general, the trade unions CC.OO. (Comisiones Obreras) and UGT (Unión General de los Trabajadores) have welcomed the approval of the new package of measures to combat the economic and social effects of the war in Ukraine (Royal Decree-Law 20/2022), and especially against the significant rise in food prices, although they have criticised the lack of social dialogue. The secretary general of the trade union UGT (Unión General de Trabajadores), Pepe Álvarez, denounced the fact that food prices "are absolutely out of control" and not because they are rising at source, but because of the "speculation" of the distribution companies.
With regard to VAT reduction, Unai Sordo, secretary general of the CC.OO. (Comisiones Obreras) trade union, rejects lowering VAT on foodstuffs, as he considers it unfair for not differentiating between people in need and people with high incomes. At most, it believes that only those foods considered to be the most essential should be subject to the measure. It would be necessary to promote progressiveness and redistributive capacity, avoiding general VAT reductions that do not focus their efforts on those who need it most.
On the other hand, the reduction of VAT on foodstuffs is a measure that businesses had been demanding for months, and they are very satisfied with its approval. However, the vice-president of the CEOE (Spanish Confederation of Business Organisations), Lorenzo Amor, has indicated that it is an insufficient measure, as it leaves meat and fish out of the reduction.
Sources
