The Spanish Government under José Luis Rodríguez Zapatero has announced it will raise IVA taxes (impuestos sobre el valor añadido) by 2 % to 18 % from July 2010.

That’s bad news in a country that is deeply entrapped in recession, one should have thought. Or is it?

If one reads the small print, one learns that in Spain Value Added Tax is charged currently on three bands:

IVA is currently charged under a Tipo Superreducido at 4 % on items, products and services that are considered indespensable and of prime necessity, such as bread, cheese, milk, fruit and vegetables. Also included are school material, books, newspapers, medicine, subsidised housing, wheelchairs, vehicles for invalids, etc. These exceptions will remain; the IVA on these items will not be raised. Good.

IVA is currently charged under a Tipo Reducido at 7 % on items such as food, softdrinks, spectacles, dental services, art objects, antiques, hair cuts, purchase and construction of domestic property, services rendered by artists, cultural activities and so forth. IVA on these products and services will be raised by 1 % to 8 %. Ok.

IVA is currently charged under a Tipo General at 16 % on everything else, including CDs, tobacco, alcoholic drinks, agricultural machinery, radio and television services. IVA on only this type of products and services will be raised by 2 % to 18 %. Let’s be fair. What else can the government do, really?

VAT is currently charged throughout the European Union at rates oscillating between 15 % (Cyprus and Luxemburg, and momentarily, the UK) and 25 % (Sweden and Hungary). An exception in the EU, and in Spain, is found in the Canary Islands, where IVA is charged at 5 %.

The proposal has not become legally binding yet. The Spanish Congreso (parliament) has to pass the proposal before it can become law. But it will, I am certain.

The photo was taken in Palma de Mallorca, Baleares, Spain. The date: September 29th, 2009. The time was 18:28:28.