Food inflation will worsen further with the tax on plastics from 2023
The rise in the price of food revives requests to lower VAT, would it be effective?
This Thursday will be the fourth working day in which products such as
fruit, bread, eggs or cheese
are sold in
Spain
with a
VAT rate of 0%
, after the reduction approved by the Government to alleviate the rise in food prices.
However, the general tendency to raise prices and the technical problems suffered by some merchants
have made it difficult for this tax reduction to translate into savings
for families.
In some areas, the reduction from 4% to 0% for common bread, bread-making flour, milk produced by any animal species, cheeses, eggs, fruits, vegetables, legumes, tubers and cereals, and the cut from 10% to 5% in VAT on pasta and oils, it has caused a drop in the price when going through the checkout, but in other businesses
the drop in VAT is not yet operational
or has been
camouflaged
by a rise Of the prices.
The FACUA organization has denounced that several supermarket and hypermarket chains are not passing on the VAT reduction to all affected foods.
The problem is that no matter how much VAT is lowered, this does not prevent
any business from setting the prices it deems appropriate
, hence some area has been able to choose to maintain the prices that existed before with VAT and increase its profit margin, which in practice supposes
a price increase that the client does not detect when making the purchase
.
The increase in costs (for example wages, for companies that have raised salaries from day 1, or packaging, for those that use
non-recyclable plastics
that are now taxed with a new tax) has led them to
raise prices from January
, in addition to the fact that it is a month in which companies traditionally take the opportunity to update the rates.
This trend, motivated in turn by
rising inflation expectations
(the Bank of Spain forecasts that prices will rise another 4.9% on average this year, which encourages companies to raise prices in view of the forecast of higher costs in 2023), it has been able to
dilute the savings that the Government wanted to achieve
by lowering VAT, a measure that is certainly discouraged by both national and international economic institutions because it is indiscriminate for the entire population.
In addition, previous experiences of how lowering VAT affects prices show that
it is not an effective policy to achieve this purpose.
In Finland, VAT on hairdressers fell from 22% to 8% between 2007 and 2012 and, despite the fact that this tax cut was 14 points, prices in that period only fell by 6%, according to a study by the University of California.
Technical problems
are
another of the obstacles that are complicating the drop in prices.
On the one hand, the large distributors that have purchased products for which they have paid a VAT of 4% and 10%, will now have to charge their customers at 0% and 5% respectively, with which they will have to
advance that additional cost
and wait to settle their accounts with the Treasury.
"If they have bought, for example, at 4%, and they sell at 0%, they will be refunded if they are in the general regime. But they will have to compensate installments until the
fourth quarter
in which they
can request a refund
, "they explain to this through sources from the Tax Agency.
This means that in practice they will be financing the State temporarily, which may affect its treasury, but that at the end of the year the impact will have been nil.
These large distributors have already applied the reduction.
EL MUNDO has monitored the price of 9 basic items in the shopping basket in three different supermarkets -
Mercadona, Carrefour and Día
- to verify it and the three surfaces have applied the tax reduction, with differences depending on the food.
Small businesses
will find themselves in a different situation
that, since they are not taxed under the general regime but rather under the so-called special regime of equivalency surcharge, cannot deduct the VAT they have paid.
"
Small stores and individual entrepreneurs are affected
because, as they may be in the famous equivalency surcharge, they pay the supplier the VAT and the equivalence surcharge, that surcharge that could previously be passed on to the final consumer now cannot be deducted, because it cannot be deducted. they have that game and
there they can have a loss"
, explains to this newspaper
Agustín Fernández
, president of the Registry of Tax Advisory Economists (
REAF
).
Small stores can then choose to
lower prices
-if they are concerned about the competition from other stores that have done so- and assume the loss, or
sell all the stock at VAT from those who bought it
before applying the reduction, with which the client can find establishments in which this tax reduction has not yet been applied.
computer problems
In addition to these problems -the rise in costs and bureaucratic problems- there are other reasons that are clouding the expected discounts in final prices, such as the
technical difficulties experienced
by some smaller-scale businesses whose cash registers were programmed to be able to apply three different types of VAT: the super-reduced rate of 4%, the reduced rate of 10% and the general rate of 21%.
"The problem is the speed and lack of foresight, which
do not contemplate the chain of actions that companies must develop
, both the companies that sell the products referred to in this package of measures, and the companies that provide technological solutions (... .) The 0% tax rate is not supported by the SII (Immediate Information System) or by TicketBAI; the equivalence surcharge of 0.625% is not supported by the SII or by TicketBAI or by the self-assessment model 303 VAT", laments the Spanish Confederation of Information Technology, Communication and Electronics Companies (
Conetic
).
The employers' association of information and communication technology companies says that they have
tested the sending of invoices with a tax rate of 0%
and that the Immediate Information System (SII) of the Tax Agency
"rejects this type of invoice
indicating that the tax rate is a required field and must be other than 0".
"When we contact the Tax Agency help service via email,
we are informed that they do not have information in this regard,
as it was recently approved by the Council of Ministers (a clear example of improvisation, lack of coordination and null interoperability on the part of the Government)", they denounce, and recall that they experienced a similar situation when the
fuel discount.
Another drawback is the very
cost
for a company to
update the labels of all its products,
which is known in economic jargon as
'menu costs'
, which in practice discourages companies from applying price changes very frequently.
Precisely for this reason, some have been able to wait until the beginning of the year to update prices, something that could have coincided in time with this reduction.
Prices will continue to rise
In any case, the discount that customers could receive when making a purchase due to the VAT reduction is not expected to last long, given that a
continuous increase in food prices
is expected throughout the year.
According to the Association of Financial Users (ASUFIN), the VAT reduction will mean savings of 3.5 euros on an average purchase that previously cost 33.67 euros, that is, just over
ten cents saved for every euro spent.
But this discount that can be obtained on some areas will soon be outweighed by the expected price increases
.
The Funcas
analyst panel
estimates in its latest report on inflation that
fresh food prices will increase by 1.1% in January
compared to December and by
0.7% in February
compared to January;
while for
processed
foods they foresee a monthly increase of
0.5% and 0.2% in January
in February.
In annual terms, the increase in unprocessed foods -including fruits, vegetables, bread, milk, eggs...- will be 13.6% and 14.6% in the first two months of the year;
while that of the accused will be at 12.6% and 11.3%.
On average, in
2023
,
processed foods
will become more expensive by
6.7%
and
fresh ones, by 9.7%.
According to the criteria of The Trust Project
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Taxes
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