News / Europe

Spanish Businesses Fret Over VAT Hike

Tourists walk past Spain's former Banco Espanol de Credito in Madrid, August 28, 2012. Tourists walk past Spain's former Banco Espanol de Credito in Madrid, August 28, 2012.
x
Tourists walk past Spain's former Banco Espanol de Credito in Madrid, August 28, 2012.
Tourists walk past Spain's former Banco Espanol de Credito in Madrid, August 28, 2012.
Caroline Arbour
SEVILLE — Spain’s standard value-added tax will jump from 18-21 percent on September 1, and the reduced rate will rise two percent, the sharpest increase in the country’s history. The hike is expected to plunge Spain deeper into recession - at least initially - and opposition to the measure is widespread.

Braving the economic storm, Fernando Vázquez Rojas opened three restaurants in the past four years in Seville, where clients can dine for under 20 euros per person - a bit more than $25.

Business has been especially good at the location on Torneo Street, but he has felt the pinch of decreased consumer spending, with revenues falling since April by "15-20 percent, depending on the moment,” said Rojas.

Tax on a meal in a restaurant is set to increase two percent, from 8-10 percent, on September 1. Rojas is not worried. He said, “I am lucky. I increase the prices with the taxes and the price is two percent more. Maybe 20 cents, 50 cents per person. It is not a significant increase in prices.”

But the change in the reduced VAT rate will also apply to housing, transportation, eyeglasses, tickets to museums and hotel stays, among other things. The standard VAT rate, which is added on to the price of most products and services, will rise from 18-21 percent.  

Some items, like school supplies, will now fall into another category and be taxed 13 percent more. And that is certainly a significant difference for a country that once had one of the lowest tax rates in Europe.

Economist Javier Díaz-Giménez, of IESE Business School in Madrid, said "the highest rates are 23 percent in Greece, Portugal and Ireland, and now Spain is certainly moving above the average and getting closer to the maximum.”

Part of the austerity package announced in July by Spanish Prime Minister Mariano Rajoy, the tax increase is expected to bring about $25 billion into government coffers during the next two years - money Madrid desperately needs to hit tough European deficit targets.

Hike runs into opposition

But the measure has been met with fierce opposition.

The president of the national association of financial advisers, Antonio Durán-Sindreu, told Spain’s public television that the tax increases will mean "death by asphyxiation" for business, and that the government should have tried to stimulate consumption.

Instead, Spanish consumers will spend less, said Javier Díaz-Giménez. "I do not think anybody will win. I think some people will lose more than others. The tax burden, of any tax, is not borne equally by everybody."

Díaz-Giménez said higher taxes affect the poor disproportionately, and the tax burden increases by age.

Cutting corners

Pensioner Manuel Chaparro said he will cut back where he can, by eating out and driving less often.

And that is bad news for businesses.

Spain's tourism industry foresees losses of about $2.5 million annually, affecting tens of thousands of jobs.

The automotive sector vehicle sales during the remaining months of this year will drop by 25,000.

Many retailers, like the clothing chain Mango, have announced they will lower prices and absorb the cost of the higher tax to avoid losing sales.

Fernando Vázquez Rojas believes that for his restaurant the impact will be temporary, lasting maybe two months.

Vázquez Rojas is somewhat of a rarity - a risk-taking optimist in a country where hope and confidence in the future right now is in short supply.

You May Like

WHO: Anti-Ebola Efforts Should Focus on West Africa

Official says WHO is 'reasonably confident' countries bordering those hardest hit by the Ebola outbreak are not seeing the virus crossing their borders More

South Sudan Crisis Threatens Development

Economic costs and lost development opportunities in South Sudan have erased what little progress the country has made since independence in 2011 More

Ukrainian PM Warns: Russia May Try to Disrupt Sunday Poll

Arseniy Yatsenyuk orders full security mobilization for parliamentary election to prevent ‘terrorist acts’ from being carried out More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
After Decades of Pressure, Luxembourg Drops Bank Secrecy Rulesi
X
October 21, 2014 12:20 AM
European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video US ‘Death Cafes’ Put Focus on the Finale

In contemporary America, death usually is a topic to be avoided. But the growing “death café” movement encourages people to discuss their fears and desires about their final moments. VOA’s Jerome Socolovsky reports.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.
Video

Video Young Nairobi Tech Innovator on 'Track' in Security Business

A 24-year-old technology innovator in Nairobi has invented a tracking device that monitors and secures cars. He has also come up with what he claims is the most robust audio-visual surveillance system yet. As Lenny Ruvaga reports from the Kenyan capital, his innovations are offering alternative security solutions.
Video

Video Latinas Converting to Islam for Identity, Structure

Latinos are one of the fastest growing groups in the Muslim religion. According to the Pew Research Center, about 6 percent of American Muslims are Latino. And a little more than half of new converts are female. VOA’s Carolyn Presutti travelled to Miami, Florida -- where two out of every three residents is Hispanic -- to learn more.
Video

Video Exclusive: American Joins Kurds' Anti-IS Fight

The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video South Korea Confronts Violence Within Military Ranks

Every able-bodied South Korean male between 18 and 35 must serve for 21 to 36 months in the country’s armed forces, depending upon the specific branch. For many, service is a rite of passage to manhood. But there are growing concerns that bullying and violence come along with the tradition. Reporter Jason Strother has more from Seoul.
Video

Video North Carolina Emerges as Key Election Battleground

U.S. congressional midterm elections will be held on November 4th and most political analysts give Republicans an excellent chance to win a majority in the U.S. Senate, which Democrats now control. So what are the issues driving voters in this congressional election year? VOA National Correspondent Jim Malone traveled to North Carolina, one of the most politically competitive states in the country, to find out.
Video

Video Comanche People Maintain Pride in Their Heritage

The Comanche (Indian nation) once were called the “Lords of the Plains,” with an empire that included half the land area of current day Texas, large parts of Oklahoma, New Mexico, Kansas and Colorado.The fierceness and battle prowess of these warriors on horseback delayed the settlement of most of West Texas for four decades. VOA’s Greg Flakus reports from Lawton, Oklahoma, that while their warrior days are over, the 15,000 members of the Comanche Nation remain a proud people.
Video

Video Turkey Campus Attacks Raise Islamic Radicalization Fears

Concerns are growing in Turkey of Islamic radicalization at some universities, after clashes between supporters of the jihadist group Islamic State (IS) or ISIS, and those opposed to the extremists. Pro-jihadist literature is on sale openly on the streets of Istanbul. Critics accuse the government of turning a blind eye to radicalism at home, while Kurds accuse the president of supporting IS - a charge strongly denied. Henry Ridgwell reports from London.

All About America

AppleAndroid