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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

Know more

  • Tax agency

  • Minister council

  • Taxes

  • Inflation