An analysis by Fedea shows that the measure will cost 700 million and that families with an income of more than 200,000 euros per year will be the most beneficiary
The VAT reduction on basic foodstuffs that came into effect on January 1 will have a “positive, albeit small” effect on the redistributive effect of the tax. Higher-income families will benefit most from the tax cut, while lower-income families will save less after these six months, according to an analysis by Fedea published this Friday.
The authors of the study estimate that the average savings for all Spanish households amount to €32.40 over the six months that the measure is in effect, which equates to just over €5 per month, with marked differences by income profile. For example, families with an income of less than 16,800 euros per year benefit from the measure with a saving of 22.40 euros; while from EUR 43,400 per year, the savings are above average at EUR 36.90, up to EUR 60.70 savings for families earning more than EUR 216,000 per year. In terms of age, the work shows that the households that benefit most from the food tax cut relative to their gross income are those made up of people over the age of 65.
The measure has an impact on the state treasury of about 700 million euros, a figure above the forecast of the Ministry of Finance, which spoke of about 660 million. Half of this expenditure would correspond to the benefit of the 40% of households with the highest income.
From Fedea, they state that there is “broad agreement” that the objectives pursued by the reduced VAT rates can be better achieved through other instruments, notably government spending programmes. “It would be fairer, more efficient, more effective and less expensive to act through direct aid to low-income people,” say the economists, who give an example of the €200 aid set in the series of anti-crisis measures introduced by the Government. . The only advantage they see in the VAT reduction is that its effects are “immediate” from January 1, when the Royal Decree came into force, and that it “reaches all consumers who need it”, while the check from Only 200 euros will reach those who ask for it and they will only enjoy it from the moment it is approved, in addition to the administrative costs for the state.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
