In a global context marked by conflicts such as the war in Ukraine and the crisis in Gaza, Spain is no stranger to economic repercussions. To mitigate the effects of this crisis, they set up tax measureslike the temporary VAT reduction on certain foods, which was initially approved for six months and extended until September. From October 1 and for three months, certain food which previously had 0% VAT will increase to 2%, which represents an increase in their price.
Additionally, foods that had a 5% VAT, such as pasta and seed oils, will increase to 7.5%. It is expected that after this period VAT will increase again to 10% for many of these products. These decisions are part of a Royal Decree Law approved to deal with the economic crisis, with the aim of limit the impact on homes. THE VAT reduction led to a reduction in state revenue, estimated at 440 million euros in recent months, but provided a total savings of 2.1 billion to citizens.
Food prices rise due to end of reduced VAT
From this Tuesday, October 1, 2024, several essential products in the basket will experience an adjustment in their prices due to the change in VAT introduced by the Royal Decree Law 4/2024. Until now, many of these foods benefited from a temporary exemption from the tax, but today this situation is changing.
Basic products such as bread, baking flour, all types of milk, cheeses, eggs, as well as fruits and vegetables, will see their prices increase. VAT at 2%. The move responds to a mandate from the European Commission which seeks to reduce the extraordinary measures adopted by various countries in recent years.
He olive oilThe fundamental food of the Mediterranean diet will also be subject to this rate of 2% until the end of the year, and from January 1, 2025, it will be taxed with a fixed VAT of 4%. On the other hand, seed oils and pastes, which had a VAT of 5%, will increase to 7.5%, which will have a significant impact on the final price that consumers will pay in supermarkets.
Unless a new extension is announced, all these foods should recover their usual VAT in January 2025, with the exception of olive oil which will retain a reduced rate of 4%. The family economy will face a new challenge with rising prices which will begin to be reflected in purchases.
Foods that range from 0% to 2% VAT
- Olive oil
- Milk
- Bread
- Legumes
- Tubers
- Eggs
- Cheese
- Fruit
- Cereals
- Vegetables
- Bread flours
Foods that range from 5% to 7.5% VAT
- Stick
- seed oils
Carlos Balado, professor at OBS Business School and director of Eurocofinexplains that “the most pronounced drop caused after the abolition of VAT was the price of olive oil, which fell by 7.13%. However, this product will now be the most affected by the changes in this tax and, although from January 2025 it will have a reduced rate of 4%, the increase from 0% VAT to 2% during this last part of the year “It is a factor of upward pressure on prices”, according to 20 minutes.
Evolution of basket prices
Inflation continues to have a strong impact on the shopping basket, with food prices increasing by 38% over the past three years. To resolve this problem, the OCU Price Observatory In June 2024, monthly price monitoring of 100 essential products began in eight major supermarket chains: Alcampo, Carrefour, Día, Mas, Ahorramas, Lidl, Mercadona and El Corte Inglés.
In August, the monthly basket amounted to 310.26 euros, which represents an increase of 76 cents compared to July. This indicates a price stabilizationafter a slight decline in previous months. However, fresh produce saw an increase of 1.6%, while the price of packaged goods increased by 1.5%. Among the products with the highest increases are lemons, oranges and mussels, which are out of season. On the other hand, certain vegetables such as onions (-13.75%) and prepared salads (-13.66%) experienced significant declines.
As for oils, extra virgin olive oil rose by 6.13%, while sunflower oil increased by an alarming 10%. It is essential to compare prices between supermarkets, as there are notable differences that can translate into significant savings for consumers.
Finally, note that a report from PriceWaterhouseCoopers for Aecoc indicates that the increase in VAT on food at a reduced rate will increase the food inflation by 1.4 points. The reduction in VAT on food prices caused a loss of revenue of more than 440 million euros in the first quarter of 2024.
