Families are encouraged to buy school materials early. O.S.
This September families in Spain will have more to worry about than the usual 'back to school' expenses. Almost everything else in their shopping basket is set to go up in price when the new VAT rates come into force on September 1st. Only the basics in the four per cent bracket (essential foodstuffs, medication, books, newspapers, disability products and subsidised housing) have escaped the rise.
Consumers will notice the biggest price hike in products that move from the cheaper VAT bracket (until now 8%) to the general rate which is about to go up to 21%. These include hairdressing services, gym fees, cinema and theatre tickets, nappies, shampoo and funerals.
The general increase from 18% to 21% will make a considerable difference when it comes to expensive items such as cars, electrical appliances or furniture. Nevertheless traders have been unable to report a significant increase in sales during August, showing little evidence of any consumer rush to purchase goods before September. According to consumer associations, this can be put down to a lack of financial resources, an absence of forward planning or even ignorance of the increase.
The association of tax office workers (GESTHA) estimates that the VAT hike will cost the average Malaga household an extra 465 euros a year, or 164 euros more in the case of one person living alone. However the consumer association Facua-Consumidores en Acción puts the figure at more like 600 euros.
A study carried out by SUR and the Al Andalus consumers association reveals that the general shopping bill will increase by eight euros a month, while utility bills (water, electricity, gas, telephone, internet) will use up an extra five euros a month. Together with an estimated three euros on fuel, this makes an extra 16 euros a month that the average family will find it hard to avoid. Bringing a planned purchase forward to the end of August, would, on the other hand, have saved extra expense to the tune of 300 euros in the case of a 12,000 euro car, or ten euros on a 400 euro washing machine. Sales staff admit, however, that business in August has been slower than expected. Stocking up on nappies before September 1st would save four euros for every 35 euros spent.
Traders have noted though that families are bringing forward purchases of stationery and other school materials ready for the new term. In September VAT on these items goes up from 4% to 21%.
August services at new prices
Consumer associations warn that in their September utility bills households will be paying the increased VAT rate even for services used before the end of August, as established in the 1992 IVA law. Tax on electricity, gas, telephone and internet will go up from 18 to 21% while water goes up from 8 to 10%. The new increase on electricity bills comes only two months after the price per kilowatt went up, adding 3.20 euros to the average bill.
Consumers of culture and leisure products will notice the difference when tax on theatre and cinema tickets, theme parks, museums and exhibitions jumps from 8 to 21%. The same increase will apply to hair and beauty salons and gymnasiums. Even so firms consulted were unable to report a mad rush to get highlights or join a gym before the end of August.