First Vice President and Minister of Economy, Nadia Calvino, announced this Monday a meeting between her Deputy, Secretary of State, Gonzalo García Andres, representatives of Agriculture and the CNMC (National Market and Competition Commission) “to sort out and strengthen everything. The tools we have, Guarantee the transfer of VAT reduction measures to the final food price.
The government is trying in this way to respond to the criticism and complaints of consumer organizations such as Facua against various supermarkets, which from January 1 will benefit from tax cuts to increase their profits by improving margins (the ability to convert revenue into profit).
“At the end of the day,” Calvino said, the executive intends to make “community efforts” to moderate inflation bring real relief to families. The latest package of measures to address the economic fallout from the war and price hikes in Ukraine included a reduction in VAT from 10% to 5% on oil and pasta and the removal of VAT from 4% on all staple foods. including bread or milk.
The reduction in VAT on food has been criticized since it was announced at the end of December. On the one hand, because it assumes the risk of unloading the entire burden on the public sector, which is already high in debt.
On the other hand, there is doubt as to how much this will translate into prices, especially after the strong increase in December (this Friday, CPI details for the last month of 2022 are known, but the forecast has already warned of an acceleration. basket. purchase).
In addition, it is difficult to predict how it will be distributed along the value chain over time: to supermarkets, suppliers, transporters, manufacturers… Finally, the effect will only be temporary if energy costs increase again (fuel, electricity . . .).
The government has already called on supermarkets to reflect the differences between current charges and 2022 charges from January 1. That same Monday, Agriculture, Fisheries and Food Minister Luis Planas said inflation “should be low” in January due to the VAT cut.
It was a “complex” issue, he admitted, but was the “most effective” alternative. “I hope and I am sure it will work, we are in contact with the primary sector, industry and distribution and our first impression is positive.” “I believe that there has been a transfer of VAT reduction, which is not exempt from specific incidents and cases in which there may be an error in the application or a delay,” said Planas.
Source: El Diario
