Spain removes VAT on basic food items to control growing inflation

The Spanish government announced on Tuesday that VAT will be completely removed for all basic food items in order to control the cost of living crisis. According to media reports, the package of measures is roughly worth $10.6 billion with additional tax cuts for other necessary items.

"For six months, we will reduce VAT on all basic foods from 4.0 percent to 0.0 percent," Spanish Prime Minister Pedro Sanchez said at the end-of-the-year press conference according to AFP.

“VAT on oil and pasta would also be reduced from 10 percent to five percent”, he added.

Sanchez said that the “basic food items” currently include bread, milk, eggs, cheese, fruit and vegetables, and cereals and he also announced a one-off payment of 200 euros to "families with incomes lower than 27,000 euros" in order to simplify the situation for the lower-income groups.

The cost of living crisis has been brewing in parts of Europe as part of the Ukraine-Russia war and since the start of the crisis, the Spanish government has spent in excess of $45 billion.

The inflation in Spain has also gone down considerably in the past few months and it currently stands at 6.8 percent – in comparison to over 10 per cent back in July. Meanwhile, Spain has already extended the discount on electricity as well as gas prices in the past six months. The scarcity of fuel in the wake of Russia’s decision to stop supplies has already impacted Spain’s economy massively.