Rising prices force Spanish government to extend IVA sales tax rebate on some staple foods

The Spanish government is set to extend some of the measures of its last anti-crisis plan that are due to expire on 30 June.

Deputy PM and economy minister Nadia Calviño confirmed that one of them will be the continuation of the Spain's sales tax (IVA) rebate on some basic food staples which, according to data from the Tax Agency up to April, has already cost the government some 254 million euros.

The decision was agreed upon in the face of rising food costs. Pending final data for June, food inflation stood at 12% in May. The figure is down from 12.9% in April, but it is still very high and has a significant impact on staples such as milk, which has risen by more than 23% compared to a year ago.

"We are awaiting the price data for June, which we will not know until the end of the month, but we can see that food prices are still high. That is why we believe that the IVA reduction must be maintained, but always linked to how prices will evolve in the coming months,” Calviño said in an interview on RNE.

The measure is not expected to be extended to other products where it was not applied until now, such as meat or fish, which have also become much more expensive in the last year. The price of fish fell by 2.7% in May, according to the latest INE national statistics institute data, but is still 3.6% more expensive than a year ago. While meat prices continue to rise, with pork being the most affected variety, increasing by more than 16% compared to May 2022.

The government had originally planned to abolish the IVA rebate if inflation fell below 5.5%. As of Monday 26 June, the rate of inflation, which excludes energy and fresh food prices in the calculation, remains above 6%.

Transport

Other measures that are also likely to be extended, are those adopted to encourage more people to use public transport. Doubts remain however about the fuel subsidy for professional hauliers.

The price of oil was well above 120 dollars when the 20 cents per litre subsidy was introduced. At the end of the year, when the subsidy was scrapped for citizens, it was around 85 dollars. It is now trading at 78, some 38% less than at the start of Russia's invasion of Ukraine.