Basic food shopping basket prices up by 9% since 2023 despite IVA sales tax reduction in Spain

The subsidy expires on 1 January after being in force for two years, at a cost to the public coffers of around 1.2 billion euros but with a limited impact on the pockets of families

Edurne Martinez

Madrid

Monday, 30 December 2024, 17:07

The basic food shopping trolley in Spain has become 9% more expensive since the government announced the measure to reduce IVA sales tax on food items two years ago, according to data analysed by Asufin, the association of financial users. Asufin has further warned that, since this discount lapses on 1 January, it fully expects prices to rise from that date onwards across all supermarket chains.

In more detail, the association's analysis shows that the prices of basic foods levelled off more in December by 5.56% with respect to the previous month. This was driven by price drops of up to 15% in the price of extra virgin olive oil, 10% in bananas and 11% in potatoes, while sunflower oil rose by 16%. Therefore, the average price of the shopping basket, based on monitoring via the five main food retail chains, amounts to 32.87 euros. All of them moderated their prices, from 3.75 euros at El Corte Inglés to 1.97 euros at Día, the sole exception being Mercadona, which increased prices slightly by 40 cents.

However, if we take as a point of reference the price of the basic food basket on 1 January 2023 compared to the current one, there has been an increase of 9%, according to Asufin. For this reason, the association's president, Patricia Suárez, is of the view that the IVA reduction has not been an effective measure because "it has been demonstrated that the margins have not been monitored, nor has a channel been established for compliance with what the lowering of IVA was intended to achieve, which was to make the basket of basic products cheaper." Moreover, as it is a measure that has been given to all across the board, it has benefited "both those who buy the most and those who buy the least" and without distinction by income bracket.

Central government will withdraw all tax subsidies on food from 1 January except in the case of olive oil where IVA will become permanently set at 4% instead of the 10% that was paid before the inflation crisis began. "Without agreeing with price caps, we believe that those in charge have the means to determine who needs direct help to combat the pernicious effects of inflation or any other factors that are contributing to rising prices," said Suárez.

Throughout 2024, central government in Madrid has been gradually restoring IVA on food items. From October to 31 December the rate on basic foodstuffs - bread, eggs, vegetables and fruit - and olive oil was already 2% instead of 0%, while IVA on pasta and seed oils reached 7.5% instead of the 5% set by the anti-crisis decree.

With the new year now upon us, and in view of the significant moderation in prices following the inflationary crisis, IVA on basic foods returns to 4% - the super-reduced rate - while that on pasta and seed oils will return to 10% (the reduced rate applied to all food items). However, when rates return to normal, IVA on olive oil will be 4% instead of the 10% previously charged.

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