The reduction of VAT on food, the main measure against inflation

The reduction of VAT on food, the main measure against inflation

The Council of Ministers will give the green light on Tuesday to the third aid package to alleviate the effects of the energy crisis unleashed by the war in Ukraine. The Prime Minister, Pedro Sánchez, will appear after the meeting to take stock of the year and present the set of measures that seek to continue to curb the escalation of inflation. The VAT reduction for some foods is expected as a star measure.

Although energy has been taking a breather in recent weeks and electricity prices have fallen to pre-crisis levels, inflation is still very high. The latest CPI reflected 6.8%, which in the case of food climbed to a stratospheric 15.3%. For this reason, the measures that Pedro Sánchez will present this Tuesday will be aimed at alleviating the latter. Once the price cap proposed by Podemos has been ruled out, the star measure will be a reduction in VAT on foods hitherto taxed at 10% (oil, yogurt, pasta, meat or fish…) that could be classified as staple foods and therefore may be taxed at 4% as is now the case with eggs, milk, cheese, vegetables, fruit or bread.

Podemos has accepted a selective VAT reduction

It is also possible that some of the few foods taxed with a general rate (21%) such as juices, soft drinks and alcoholic beverages will be reduced from 21% to 10%. The VAT reduction on food is the proposal that the Ministry of Finance has been defending for weeks, considering that it is the one that can have the greatest impact on the calculation of inflation, but whose widespread application has been rejected by Podemos.

Finally, last week, the Minister of Labor, Yolanda Díaz, acknowledged that if it is applied surgically to some foods, such as fish, she would support it. That’s how it seems to have been. It is also yet to be revealed whether this discount will include other products considered basic in the shopping basket to which 21% is now applied, such as cleaning items (detergent, soap, bleach, mops.) or whether it is restricted to food.

The Podemos proposal to approve a check of between 200 and 500 euros gains strength

Another novelty that is expected to be heard this Tuesday is the measure pointed out last week by the leader of Podemos, Ione Belarra. An aid check for the most vulnerable from which some 8 million people could benefit, according to Podemos. The amount was still under discussion between the partners yesterday and could vary between 200 and 500 euros. This help could complement or extend the check of 200 euros in force since September.

The rest of the doubts that the president must clear up today is how many of the measures in force from the previous decrees will be extended and how many will disappear or be modified.

Expansion of electrical aids

Taking into account the clues of the items of the General Budgets of 2023, only one destined to cover the gratuity of commuter trains has been reflected. In doubt is whether the State aid to cover the 50% reduction in public transport for the autonomous communities is maintained.

In the transport area, the current generalized subsidy for all fuels that was approved in April is practically ruled out. Although, as the Minister of Economy, Nadia Calviño, pointed out last week, everything indicates that it will be maintained for professional groups such as transporters, agriculture, livestock and fishing, as Podemos had been requesting in recent weeks.

End of the universal transport bonus

In the electricity section, the extension of the main measures that expire on December 31 is expected, such as the reduction of VAT on electricity and gas up to 5%; as well as the suspension of the tax on electricity generation (7%) and the reduction to 0.5% of the electricity tax.

The 15% increase in non-contributory pensions in 2023 should also be included in this package, which will also affect the minimum vital income (IMV), as well as the extension of the 2% limit to the increase in rents already agreed with Bildu.

PSOE – We can

Housing stresses the negotiation

But if something has complicated the negotiation of this third package of aid measures, that has been the issues related to housing aid, as has happened almost since the beginning of the legislature.

Possible rental aid and mortgages have been among the most difficult problems to save in view of the approval of this third aid package.

In recent days, both the Minister of Social Affairs and leader of Podemos, Ione Belarra, and the Minister of Labor, Yolanda Díaz, have pressed in this direction from their Twitter accounts.


I am convinced that the best news this Christmas for many people would be for the Government to freeze rents, as we already did in the pandemic, and also variable-rate mortgages. We need the PSOE to understand that this is the main expense of the majority of families.

—Ione Belarra (@ionebelarra) December 25, 2022 “>

Yesterday the tension was increasing. “The PSOE resists. We continue”, pointed out the UP spokesman in Congress, Pablo Echenique. The rental price cap is the extent to which the housing law that should have been approved almost two years ago has run aground.

Nor does it seem easy to reach an agreement regarding the ceiling on variable-rate mortgages. From the socialist side of the Government, they consider that the protocol approved last November with reductions in the interest rate during the grace period, the possibility of carrying out a second debt restructuring or the elimination of exchange commissions is sufficient. from variable to fixed mortgage during 2023, as well as the best practices agreement to which the main financial entities have adhered.

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