Spain scraps value-added tax on staple foods in aid package

Spain has announced a new series of measures including scrapping Value Added Tax on staple food and has extended rent and eviction controls to help ease the economic crisis caused by Russia's war in Ukraine

Spain on Tuesday announced a new series of measures including scrapping valued-added tax on staple food, such as bread and milk, and is extending rent and eviction controls to help ease the economic crisis caused by Russia’s war in Ukraine.

Prime Minister Pedro Sánchez announced the measures in an end-of-year speech. The government said it would also cut VAT on cooking oil and pasta from 10% to 5%. Fish and meat products were excluded from the tax reductions.

Sánchez said the three packages of aid measures passed since the start of the war in February would cost about 45 billion euros ($48 billion), including 10 billion for the latest round of measures.

He said the aim was "to protect the middle and working classes given the rise in the cost of living, energy and food."

Although inflation and energy prices in Spain have fallen sharply in recent months, many Spaniards continue to suffer severely from a crisis that started with the COVID-19 pandemic in 2020 and was exacerbated by the war.

The government will maintain a cut in the tax on electricity, from 10% to 5%, for another six months as well issuing a new check of 200 euros for people earning less than 27,000 euros a year. He said the check would benefit 4.2 million homes.

The government extended the suspension of evictions of poor people, a measure that has been in effect since the COVID-19 pandemic. It said people whose house rents are up for renewal in the next six months can seek a six-month extension on their contracts with no change in the monthly payments.

The government also maintained free commuter and short-distance train travel for frequent users for all of 2023. It added mid-distance urban bus transportation into the package. Fuel discounts for truck drivers were also to be continued.

The measures will take effect Jan. 1.