VAT on basic food products will increase this Tuesday, October 1. As provided for in the latest anti-crisis decree, approved in the Council of Ministers on June 25, the government is starting to standardize taxes to moderate inflation in supermarkets and stores and to respect the limits on public spending of the new tax rules of the European Union. Union (EU).
The increase in Value Added Tax (VAT) is progressive. From January 1, 2023, the Executive decided to reduce VAT on foods that already benefited from the reduced rate of 4% to 0% and, in addition, to reduce VAT on oils from 10% to 5% — including olives — and pasta. “In this way, the situation of families has been improved, especially those with low incomes, who devote a greater part of their income to the acquisition of these basic necessities,” defends the government.
In June 2024, the Council of Ministers agreed to extend this measure and include oil among the group of food products benefiting from a VAT reduction to 0%, taking into account the extraordinary increase in “gold ” liquid. As part of this extension, a gradual normalization was planned from the last quarter of the year.
From 0% to 2%
From October 1 to December 31, 2024, the 0% VAT rate on basic food products will be 2%. These foods are: olive oil, common bread, as well as frozen common bread dough and frozen common bread intended exclusively for the manufacture of common bread; bread flours; milk produced by any animal species (natural, certified, pasteurized, concentrated, skimmed, sterilized, UHT, concentrated and powder); cheeses; eggs; and fruits, vegetables, legumes, tubers and cereals which have the status of natural products in accordance with the Food Code and the provisions enacted for their valorization.
From 5% to 7.5%
From October 1 until December 31, 2024, the next group of foods considered basic will increase from a VAT of 5% to one of 7.5%. These foods are: seed oils and pastes.
The latest data published by the INE on food inflation indicates a moderation in price increases to 2.5% over one year, a minimum since October 2021.
The CPI for food fell six-tenths from its interannual rate. In other words, food became 2.5% more expensive in August compared to the same month last year. In July, this increase was 3.1%. In June, 4.2%. “This reduction brings food inflation closer to the general index, thanks to the support measures adopted [principalmente la bajada del IVA]», defended the Ministry of the Economy in mid-September.
Olive oil, which has continued to increase at meteoric rates (even above 70%) for months, became 25.1% more expensive in August, the smallest year-over-year increase since May 2023. In monthly rate, comparing July prices to July prices. In June, oil became cheaper by 1.7%. This is the fourth consecutive month of decline in liquid “gold”.
On October 15, the INE will publish food inflation data for September, although it has already announced that it is continuing its easing.
Only Vox voted against the measure
At the end of July, the coalition government obtained validation by the Congress of Deputies of its latest anti-crisis decree. The parliamentary groups of the executive partners (PSOE and Sumar), ERC, Junts, PNV, Podemos, Canarian Coalition, BNG and Bildu voted in favor of this decree. The PP abstained and Vox voted against.
The First Vice President and Minister of Finance, María Jesús Montero, defended Royal Decree-Law 4/2024 and recalled that it extends certain measures in force since the end of 2023, but eliminates others, “in response to moderation of inflation” and comply with the budgetary rules of the European Union (EU), activated in 2024, after having been suspended since 2020 to allow a social response to the double shock of the pandemic and the Russian invasion of Ukraine.
The total cost of all measures taken since 2021 to mitigate the damage of inflation is around $50 billion, with the most expensive measures being those related to electricity (which between them exceed $20 billion: reduction VAT on the invoice, special tax, sector subsidies, etc.) and IRPF (income tax) deductions.
Precisely, in June, other measures of the anti-crisis decree which expired at the time were extended, such as the reduction in personal income tax for families with lower incomes, precisely for those who receive the Interprofessional Minimum Salary (SMI), but which provides income from benefits of up to 22,000 euros gross annually. “The sum of tax measures, between VAT and personal income tax, represents a saving of 3 billion euros per year for families,” declared the first vice-president and Minister of Finance.
