The Spanish government’s increase in sales tax from September 1st could not have come at a worse time for the country’ retailers who suffered a 7.3 percent decline in sales in July from a year earlier.
Frightened of losing even more trade in the middle of a recession many Spanish shops, supermarkets, restaurants and leisure companies have said they will not pass on the VAT increases in their prices.
The top rate of VAT rises from 18 to 21 percent.
A consumer organisation has calculated it will cost an average family an additional 470 euros a year.
The government expects to raise an extra 7.5 billion euros annually.
Different goods and services are taxed at different rates: the VAT on train travel, for example, will rise from eight to 10 percent and operators are passing on the entire cost.
Lighting and heating their homes and cooking will all cost more for Spaniards.
Tax on electricity and gas as well as phones rises from 18 to 21 percent while on water bills it goes up from eight to 10 percent.
The hospitality industry’s basic rate for things like beverages rises from eight to 10 percent, but for those wanting to read a newspaper with their coffee or beer that will stay taxed at the lowest – four percent – rate.
Culture will take a hit with a VAT hike from eight to 21 percent on tickets for cinemas, theatres, concerts and theme parks, though some have said they will not pass that on to customers.