The Government does not consider it necessary to extend the VAT reduction to more foods, such as meat and fish, as consumer associations, business employers and the PP have demanded these days. The Minister of Finance, María Jesús Montero, has rejected the proposal on Tuesday and has defended that the Executive has selected the foods that are considered basic and that were already taxed at the super reduced rate, of 4%, apart from oil and pasta, which pass from 10% to 5%.
The popular were the main defenders of the VAT reduction on food to try to alleviate the escalation of prices, but now they are asking to include more food on the tax exemption list, among other issues, to support the government's anti-inflation decree . The Spanish Association of Consumers (Asescon) or the Pimec employers also claim to reduce the tax burden on fish and meat and consider that the VAT reduction, as it is proposed, has limited savings for households, just a few cents, although they welcome you.
Montero responded that the group of tax experts concluded that it was "fiscally fairer" to have different rates of VAT on food. The products included in the basic basket, he has added today to the media from Seville, have a greater presence in the shopping basket of the lowest incomes.
"The reduction in VAT on food is not a progressive measure, because it affects all households regardless of their income level while the State subtracts revenue," argues María Romero Meléndez, an AFI economist. In this sense, she recalls an Airef study on tax benefits published in 2020 and which concluded that the use of super-reduced tax rates benefits households with higher incomes more.
The Government has promised to evaluate the correct application of the VAT reduction by the food industry –Montero has recalled that all merchants are obliged to comply with the measure–, although it has not yet detailed how it will do so. From the sector they remember anyway that the tax reduction, which they claim to be complying with, can alleviate inflation in food, but not prevent new price increases derived from the increase in production costs. Government sources consulted agree with this thesis, since the law does not establish ceilings on food prices. The food chain law also prohibits selling below production costs, they add in the industry. This rule was approved with the aim of preventing producers –farmers and ranchers– from working at a loss and using basic products as advertising claims.
Therefore, the future mechanism announced by the Government must distinguish between possible price increases caused by costs and those that may be unjustified. “It is complicated because various factors intervene in the formation of prices; In any case, we will have to wait for the Government to explain the evaluation mechanism,” says Romero Meléndez, from AFI.
The CNMC will also monitor the application, a task that Facua agrees to describe as "complex" taking into account the "enormous number of establishments in Spain", more than 19,000. For this reason, it has requested the "collaboration" of the autonomous consumer protection administrations, which, in its opinion, "should" also implement "protocols" to "monitor" prices and "notify the Competition if there are any increase that is not justified by increased costs”.
