The President of Spain, Pedro Sánchez, is expected to announce a package of ‘selective’ VAT reductions on food later today, Tuesday, December 27
The Council of Ministers in the Madrid parliament will give the green light on Tuesday to the third aid package to alleviate the effects of the energy crisis unleashed by the war in Ukraine.
Sánchez, who closed the agreement this morning with the second vice president Yolanda Díaz, will appear after the meeting to take stock of the year and present the set of measures that seek to continue stopping the escalation of inflation. The VAT reduction for some foods is expected as a star measure.
Food prices climb to 15.3%
Although energy prices have recently fallen to pre-crisis levels, inflation is still very high. The latest CPI (Consumer Price Index) was reported as 6.8%, which in the case of food has climbed to a staggering 15.3%.
The measures that the President of Spain will present this Tuesday will be aimed at alleviating the latter. Once the price cap proposed by Podemos (left-wing populist political party) has been ruled out, the star measure will be a reduction in VAT on foods hitherto taxed at 10% (oil, yogurt, pasta, meat or fish…) that could be classified as staple foods and therefore may be taxed at 4% as is now the case with eggs, milk, cheese, vegetables, fruit or bread.
It is also entirely possible that some foods that are taxed with a general rate of 21%, such as juices, soft drinks and alcoholic beverages, will be reduced from 21% to 10%. The VAT reduction on food is the proposal that the Ministry of Finance has been defending for weeks, considering that it is the one that can have the greatest impact on the calculation of inflation, but whose widespread application has been rejected by Podemos.
Finally, last week, the Minister of Labour, Yolanda Díaz, acknowledged that if it is applied surgically to some foods, such as fish, she would support it. That’s how it seems to have been. It is also yet to be revealed whether this discount will include other products considered basic in the shopping basket to which 21% is now applied, such as cleaning items (detergent, soap, bleach, mops.) or whether it is just restricted to food items.
In the electricity section, an extension of the main measures that expire on December 31 is expected, such as the reduction of VAT on electricity and gas up to 5%; as well as the suspension of the tax on electricity generation (7%) and the reduction to 0.5% of the electricity tax.
Tax help with rent and mortgages
Possible rental aid and mortgages have been among the most difficult problems to save in view of the approval of this third aid package.
In recent days, both the Minister of Social Affairs and leader of Podemos, Ione Belarra, and the Minister of Labour, Yolanda Diaz, have pressed in this direction from their Twitter accounts. (If you click on the Twitter link below, you will see the ‘Translate” button for an English explanation.)