14 years without a VAT rise in Spain: is a hike to 23% coming?
Spain has gone 14 years without raising VAT, the second-longest stretch since 1986. Portugal already charges 23% and Hungary 27%. Will it rise soon?
English · Original discussion in Spanish · Published
14 years without a VAT rise in Spain: is a hike to 23% coming?
Spain has now gone 14 years with its standard VAT rate frozen at 21%, the longest freeze since the tax was introduced, just one year short of matching the 15-year record set between 1995 and 2010. With public finances squeezed by social spending and the need for revenue, the question is not whether VAT will rise, but when and by how much.
History shows that every increase has trinc a period of stability broken by the need to raise revenue. In 2012, Rajoy's government raised it from 18% to 21% in the middle of the crisis. Now, with the structural deficit still high and debt above 100% of GDP, some analysts place the next move between 23% and 25%, in line with Portugal (23%) and Hungary (27%). There is room to manoeuvre: the Spanish rate remains below the OECD average.
But politics also matters. In an election year, touching VAT is poison. So far the government has preferred to patch things up with taxes on tech giants or levies on Chinese imports, such as the recent 3-euro tariff expected to bring in an extra 1 billion. Still, defenders of the status quo point out that 21% is already a heavy burden on consumption.
Will VAT hold for another two years, or is an imminent hike on the way? History says freeze cycles rarely last beyond fifteen. The clock is ticking.
Spain has now gone 14 years with its standard VAT rate frozen at 21%, the longest freeze since the tax was introduced, just one year short of matching the 15-year record set between 1995 and 2010. With public finances squeezed by social spending and the need for revenue, the question is not whether VAT will rise, but when and by how much.
History shows that every increase has trinc a period of stability broken by the need to raise revenue. In 2012, Rajoy's government raised it from 18% to 21% in the middle of the crisis. Now, with the structural deficit still high and debt above 100% of GDP, some analysts place the next move between 23% and 25%, in line with Portugal (23%) and Hungary (27%). There is room to manoeuvre: the Spanish rate remains below the OECD average.
But politics also matters. In an election year, touching VAT is poison. So far the government has preferred to patch things up with taxes on tech giants or levies on Chinese imports, such as the recent 3-euro tariff expected to bring in an extra 1 billion. Still, defenders of the status quo point out that 21% is already a heavy burden on consumption.
Will VAT hold for another two years, or is an imminent hike on the way? History says freeze cycles rarely last beyond fifteen. The clock is ticking.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (13 replies).
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