Spain Cuts VAT on Basic Foods to Address Inflation

Spain Cuts VAT on Basic Foods to Address Inflation

Spanish Prime Minister Pedro Sánchez announced in an end-of-year news conference a new package of measures worth €10 billion ($10.6 billion) to ease the cost of living, including slashing the value-added tax (VAT) on basic foodstuffs.

For six months, the Spanish government will reduce VAT on all basic foods from 4% to zero. Pedro Sánchez said the list of such food items includes bread, milk, eggs, cheese, fruit and vegetables, and cereals. VAT on oil and pasta will be reduced from 10% to 5%. The Spanish Prime Minister also unveiled a one-off payment of €200 to families with incomes lower than €27,000 to offset food prices, which will cost some €4.2 million.

The new aid plan is the sixth package of measures launched by the Spanish government to respond to the “economic and social consequences” of Russia’s invasion of Ukraine. The overall amount released by Spain’s government to help those struggling with soaring inflation and runaway food and energy prices now stands at €45 billion. The European country’s efforts to address soaring inflation have borne fruit in recent months, with the figure falling from a record 10.8% in July to 6.8% in November.

Extending the discount on electricity and gas prices by six months and the ban on cutting energy supplies to vulnerable households throughout 2023, the government said the 20 cent discount per litre of fuel available for all consumers will now be limited to the most affected sectors such as lorry drivers, farmers, shipping companies and fishermen.