On December 27, 2022, the Spanish government announced a new package of inflation-relief measures which will reduce, and even remove, VAT on many essential food items. The reduced rates are going to be in place from January 1 until June 30, 2023.
The VAT cuts are introduced for the following items:
- Basic food (such as milk, bread, fruits and vegetables, eggs, cheese, etc.) – rate is reduced from 4% to 0%
- Oil and pasta – rate is reduced from 10% to 5%
This decision is a part of a wider plan to mitigate the impact of soaring inflation which has made life very difficult for many Spanish families throughout 2022. The projected cost of the new package is €10 billion – this means that the country’s overall expenditure on different aid measures will go up to €45 billion.
Spain is not alone in its efforts to alleviate the struggles of its citizens. During the last couple of years, many European countries have reduced VAT rates to tackle the impact of the Covid-19 pandemic, inflation, and high energy and gas prices. This was done despite the pre-pandemic initiative within the EU to systematize VAT rates and even eliminate lower rates.
With all these turbulent changes, a crucial question arises – how can the governments be sure that new tax rates will be implemented properly and yield the desired results? Spain, for example, definitely does not want to lose any tax collection after already investing €45 billion. And there are many opportunities for the tax to disappear – from misunderstanding and technological glitches (which the taxpayers will always use as an excuse if given chance), to deliberate tax fraud.
It seems that now more than ever, every tax authority needs a modern fiscalization solution – one that will utilize the latest technology to make sure that all tax changes achieve their intended impact. The best solutions in the market enable safe and direct internet communication between a tax authority and its taxpayer (by implementing sales data controllers and secure elements). In addition, they guarantee that the same level of data authenticity is preserved even when the internet is unavailable.
This means that new tax rates can be distributed quickly and undeniably to each taxpayer with a click of a button. New challenges require new solutions – “The greatest danger in times of turbulence is not the turbulence – it is to act with yesterday’s logic.” (Peter Drucker)