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

    Video Twists and Turns Aplenty in US Presidential Race

    Even as Americans pause for this week’s Memorial Day holiday, much attention is focused on the presidential contest

    Iran Orders Social Media Sites to Store Data Inside Country

    New requirements are expected to affect the instant messaging app Telegram, which has more than 20 million users inside Iran

    The Struggle With Painkillers: Treating Pain Without Feeding Addiction

    'Wonder drug' pain medications have turned out to be major problem: not only do they run high risk of addicting the user, but they can actually make patients' chronic pain worse, US CDC says

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Chinese-Americans Heart Trump, Bucking National Trendi
    X
    May 27, 2016 5:57 AM
    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Chinese-Americans Heart Trump, Bucking National Trend

    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Reactions to Trump's Success Polarized Abroad

    What seemed impossible less than a year ago is now almost a certainty. New York real estate mogul Donald Trump has won the number of delegates needed to secure the Republican presidential nomination. The prospect has sparked as much controversy abroad as it has in the United States. Zlatica Hoke has more.
    Video

    Video Drawings by Children in Hiroshima Show Hope and Peace

    On Friday, President Barack Obama will visit Hiroshima, Japan, the first American president to do so while in office. In August 1945, the United States dropped an atomic bomb on the city to force Japan's surrender in World War II. Although their city lay in ruins, some Hiroshima schoolchildren drew pictures of hope and peace. The former students and their drawings are now part of a documentary called “Pictures from a Hiroshima Schoolyard.” VOA's Deborah Block has the story.
    Video

    Video Vietnamese Rapper Performs for Obama

    A prominent young Vietnamese artist told President Obama said she faced roadblocks as a woman rapper, and asked the president about government support for the arts. He asked her to rap, and he even offered to provide a base beat for her. Watch what happened.
    Video

    Video Roots Run Deep for Tunisia's Dwindling Jewish Community

    This week, hundreds of Jewish pilgrims are defying terrorist threats to celebrate an ancient religious festival on the Tunisian island of Djerba. The festivities cast a spotlight on North Africa's once-vibrant Jewish population that has all but died out in recent decades. Despite rising threats of militant Islam and the country's battered economy, one of the Arab world's last Jewish communities is staying put and nurturing a new generation. VOA’s Lisa Bryant reports.
    Video

    Video Meet Your New Co-Worker: The Robot

    Increasing numbers of robots are joining the workforce, as companies scale back and more processes become automated. The latest robots are flexible and collaborative, built to work alongside humans as opposed to replacing them. VOA’s Tina Trinh looks at the next generation of automated employees helping out their human colleagues.
    Video

    Video Wheelchair Technology in Tune With Times

    Technologies for the disabled, including wheelchair technology, are advancing just as quickly as everything else in the digital age. Two new advances in wheelchairs offer improved control and a more comfortable fit. VOA's George Putic reports.
    Video

    Video Baby Boxes Offer Safe Haven for Unwanted Children

    No one knows exactly how many babies are abandoned worldwide each year. The statistic is a difficult one to determine because it is illegal in most places. Therefore unwanted babies are often hidden and left to die. But as Erika Celeste reports from Woodburn, Indiana, a new program hopes to make surrendering infants safer for everyone.
    Video

    Video California Celebration Showcases Local Wines, Balloons

    Communities in the U.S. often hold festivals to show what makes them special. In California, for example, farmers near Fresno celebrate their figs and those around Gilmore showcase their garlic. Mike O'Sullivan reports that the wine-producing region of Temecula offers local vintages in an annual festival where rides on hot-air balloons add to the excitement.
    Video

    Video US Elementary School Offers Living Science Lessons

    Zero is not a good score on a test at school. But Discovery Elementary is proud of its “net zero” rating. Net zero describes a building in which the amount of energy provided by on-site renewable sources equals the amount of energy the building uses. As Faiza Elmasry tells us, the innovative features in the building turn the school into a teaching tool, where kids can't help but learn about science and sustainability. Faith Lapidus narrates.

    Special Report

    Adrift The Invisible African Diaspora