The Spanish government now believes that the extortionate rise in food prices has peaked after reaching a 15.4% increase in January, a sentiment which Brussels shares. This is proof, according to the administration, that the VAT cut applied to certain staple products like bread and olive oil is working, but it is still considering tax breaks on meat and fish if the prices rebound again.
For now, President Sánchez wants a little more time to study the effects of the reduced VAT on grocery costs “in depth” before making a decision on extending reductions to other food items.
The third aid package designed to alleviate the consequences of the war in Ukraine came into effect on January 1 and involved eliminating VAT on milk, bread, eggs, fruit and vegetables, legumes and cereals. In addition, this tax was reduced from 10% to 5% on products like oils and pasta.
However, whether as a consequence of this tax cut or simple inflation, many shoppers have noticed that the price of other supermarket items has been hiked up, so consumers are still forking out more at the check-out than this time last year.
In fact, data from the INE shows that, in monthly terms, food became 0.4% more expensive in January compared to December despite the VAT reduction, but the central government still maintains that the price increases have been halted:
“The drop in VAT has worked and has allowed a drop in the prices of the basic shopping basket,” Minister of Finance María Jesús Montero said on Tuesday February 21.
Opposition parties have accused the Spanish supermarkets of being “ruthless speculators and capitalists” and have called on President Sanchez to apply a 15% reduction on food costs across the board, something that has been roundly rejected time and again.
However, once the figures come in for the first fiscal quarter, sources close to the Minister of Finance believe the VAT cut could be applied to fish and meat from March if prices continue to escalate.
Source : Murcia Today
