Spain scraps VAT on basic food to help with rising cost of living | Hacker News Reader

Spain scraps VAT on basic food to help with rising cost of living

euronews.com

48 pointsgeox12 comments

While I think reducing VAT on basic things is a good idea, sadly this won't have any impact.

Why? It already happened before here. When someone sells something for, say, 1€ and then with the VAT reduction it should sell for 0.95€, they won't change prices which translates to more benefit. Why would they? Also they always can claim they did take in account the reduced VAT but their costs have increased and so their prices.

Stickiness works in both directions. Even if stores don't reduce their prices, having extra profitability will decrease upward pressure on prices.

Yeah so to me the key problem is that it is just for six months. In the long term, you definitely will see someone take advantage of that margin reduction to price compete you down, but over six months there is no way market mechanics are going to cause the price to suddenly drop.

Also, it is key that a VAT is collected behind the scenes. With a sales tax, the change at least could be immediate, as the money is individually itemized at the point of sale to the customer, and it would take time to raise prices to somehow compensate for the mess.

...but, with a VAT? This makes no sense: the food likely already had VAT charges added to it months ago during the various stages of it being produced. Apparently this was a big controversy in Turkey, where stores noted their inventory had already been purchased with some high VAT and it wasn't like anyone was going to give them a refund.

https://www.duvarenglish.com/amp/market-and-grocery-store-ow...

I'm repeatedly confused by these one-off payments. In Germany, consumer gas prices increased by 2-4x (iirc) and electricity prices increased by at least 40%. Supermarket goods have increased by up to 50%. We got a 300€ one-off payment before tax. I'm fairly well off for my means and I'm still feeling it. I have no idea how the less fortunate (and there are many) are able to deal with it.

I think the one-offs are aimed at helping those indebted because of the increasing prices, while the six months without VAT on basic foodstuffs would be an attempt to prevent the issue from getting worse.

Alas, it seems to be nowhere near enough for those who are worst off.

I think one-off payments are just easier to get through, and while they obviously don't fix everything they do help people who are hit with surprise bills.

And governments are working on other measures as well.

In other news, Spain charges VAT for basic food?

Is this common in Europe? I don't think it's common in the US, which hates actual people.

Every country in Europe has vat on groceries: https://ec.europa.eu/taxation_customs/business/vat/telecommu....

There’s no vat in the US, there’s state tax, and yes, some states charge state tax on groceries: https://www.cnbc.com/amp/2022/04/15/as-food-prices-soar-some....

No clue how in the era of having an answer by the fingertips would one ask such questions online.

Some US states hate people more than others.

But "sales tax" is what USers call it. Europeans probably have their own names for it in their various languages, which is allowed. Also allowed is surprise at counterintuitive practices in countries where one does not live.

VAT and sales tax are different though, VAT is included in the list price. Sales tax is added on.

The difference is a matter of trivial arithmetic, as may be seen by the Spanish example.

> Spain will scrap the value-added tax on basic food items for six months

Clickbait title.

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