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FOOD AND DRINK

Will Spain soon no longer be the land of cheap alcohol?

As the EU pushes a revised common framework for higher tax on cigarettes and alcohol, Spain could see drinks prices rising.

Published: 18 April 2022 17:38 CEST
Will Spain soon no longer be the land of cheap alcohol?
Alcohol is still relatively well priced in Spain compared to other European countries, but it's getting more expensive. (Photo by JAIME REINA / AFP)

A glass of (cheap) wine and some (free) tapas. This simple combination is a part of the atmosphere that attracts so many people and tourists to move to or at least spend a few days in Spain – and it might be about to end soon.

The European Union is looking to increase taxes on beer, wine, and other alcoholic beverages as the minimum rates to be applied by all member states have not been revised since 1992.

The rates “have not kept pace with inflation, the evolution of the market, consumption patterns or growing public health concerns”, the EU commission said.

Currently, Spain exercises one of the lowest duties in Europe, collecting just about € 2.69 per 700ml liquor bottle. Germany collects € 3.65, France € 5.05, and Italy € 2.90, as a comparison.

READ ALSO: What’s cheaper about life in Spain than in other countries?

When it comes to beer, the country taxes € 0.03 per 33cl, well below the European average of 14 cents, according to the EU Commission database.

It makes for some famously cheap alcoholic drinks – and the Spanish cities and islands’ bars and restaurants indeed thrive from the business such an offer can draw.

However, Spain could collect some € 1bn in taxes yearly if it applied similar rates as its neighbouring European countries, Diario de Navarra reports.

READ ALSO: 13 mistakes tourists in Spain are bound to make

Spain’s collection of excise duties accounted for only 0.29 per cent of its total tax revenues in 2019. However, the EU average is 0.79 per cent.

The country is also famous for its “happy hour” deals, with free tapas or two for one drinks sometimes lasting much longer than an hour, making it really the land of cheap alcoholic beverages.

Calls from the health sector

Besides increasing tax collection, Spanish authorities also have to weigh complaints and growing calls for higher taxes from health sector representatives – those looking to reduce consumption by ending the rule of the cheap alcohol in Spain.

For years, health associations in Spain have issued alerts on the connections between alcohol and health problems, with children and adolescents particularly vulnerable in Spain.

While tobacco use has decreased over the years, the “prevalence of drunkenness”, meaning the percentage of teenagers who say they “often” get drunk, is above the European average, at 17 per cent in Spain, according to a 2019 EU study.

To prevent alcohol abuse, several medical institutions and associations in Spain have been asking for a price increase in alcoholic beverages and even an increase in the minimum age for consumption in the country.

READ ALSO: Ten facts you probably didn’t know about Spanish wine

Spanish teenagers can legally start alcohol consumption at 14 years, and the Spanish Society of Family and Community Medicine (SEMFYC) is asking for the government to increase that age to 18.

SEMFYC also points out that an excise tax should be used to increase the price of alcoholic beverages and reduce their accessibility either through taxes or by setting a “minimum price”.

The organisation strongly defends that there is no proof that a “moderate consumption” of alcohol brings benefits, questioning the idea that the one glass of wine a day, a staple of some versions of the healthy Mediterranean diet, is actually good for people’s health.

Will my wine get more expensive, then?

In the short term, no, but the difference in tax collection compared to other EU countries is weighing on Spanish authorities – a yearly € 1bn in the collection is not something to be ignored.

Even if the government doesn’t make a move first, the European Union has launched a public call for feedback on its framework governing excise duty rates for alcohol. It will stay open until July 4th.

It favours higher taxes, if not to respond to galloping cost of living prices in the continent, as a way to adapt to growing public health concerns. EU processes can take long, and their adoption by member states still longer, but there may come a time when Spain will no longer be the land of cheap alcohol.

READ ALSO: Ten things NEVER to do when dining in Spain

Traditions can adapt and evolve, and as long as the tapas and lively environment remain more or less the same, happy hour can continue to be just as happy.

Member comments

  1. I’m curious why the article doesn’t include the reduction in tourist traffic and money added to the economy when sharing the upside of a billion euros in additional taxes. This won’t come for free as the article shares many go on holiday to Spain for these reasons. As far as raising taxes to deter younger people from drinking? That hasn’t worked anywhere in the world and that is with alcohol pricing significantly higher than it is in Spain. I am not a fan of the EU directing cultural constraints on countries, the EU was a trading block for economic purposes and now its purely a 4th level of government only, and when has that EVER added value.

  2. I agree & maybe it’s just me but instinctively I rile at the notion of a body of authoritarian figures dictating my every move. Most people are responsible enough to know what they should and shouldn’t do & regulating what people can and cannot eat or drink won’t deter those who don’t. Why fix it if it’s not broken & as the previous poster has stated people come to Spain not just for the sea and sun but for the cheaper prices. This model has served Spain very well & I hope they don’t lose sight of the fact that there are plenty of cheap alternatives to head for if prices become unattractively high.

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TAXES

How wealthy people in Spain are avoiding the millionaire tax

It may come as no surprise that the Spanish government has collected far less money than expected from the millionaire tax, as wealthy people have found several ways to avoid paying it.

Published: 16 April 2024 09:40 CEST
Updated: 20 April 2024 07:23 CEST
How wealthy people in Spain are avoiding the millionaire tax

Spain’s temporary tax on the super rich (impuesto de solidaridad a las grandes fortunas) is usually referred to as the millionaire’s tax or solidarity tax. It’s a tax on people worth more than €3 million and it’s not a tax on income, but rather on assets and holdings.

It was introduced by the country’s left-wing coalition in an attempt to help Spaniards weather the economic storm of the cost-of-living crisis. But as of September 2023, around a year after the tax measure was first brought in, the Spanish government reported that it had raised €623 million in revenue, a decent amount but considerably less than the initial projection of €1.5 billion. We now may know why that is.

According to tax data, the millionaire’s tax targeted just 12,010 payers, which represents barely 0.1 percent of the total taxpayer base in Spain.

On average these high-worth individuals each paid €52,000, which is complementary to the Wealth Tax (impuesto patrimonio).

However, though it was supposed to be a temporary tax measure, there’s now some uncertainty about exactly how temporary it is going to be in the long-run. The government has been making non-comital noises as of late, and amid the uncertainty many wealthy Spaniards have begun trying to find ways around paying it and trying to reduce their wealth tax bill overall.

READ ALSO: When will Spain’s millionaire tax be scrapped?

Donations

A lot of it comes down to ‘donations’ in order to make the money non-taxable or to reduce the taxable base on paper.

Spanish tax consultancy firms consulted by elEconomista.es report an increase in requests for help arranging ‘donations’ from parents to children or spouses in recent years, as well as the arranging inheritance agreements in the regions that allow deductions to offset the tax burden of the millionaire’s tax.

Donations are sometimes done through money and shares, but donating properties also seems to be a way of avoiding extra taxes, although property donations can work out more expensive due to the procedures to be followed and the taxes to be paid on property transactions in Spain.

The aim is to avoid paying the millionaire’s tax by splitting up the fortune, essentially because donations between family members is a way to reduce the level of wealth (on paper) and thus keep it below €3 million, the taxable base from which the millionaire’s tax is levied.

This trick is even more beneficial in regions where donations are subsidised, such as Madrid and the Balearic Islands, where inheritance agreements can be made, because any capital gain generated by the donation is not taxed.

READ ALSO: Inheritance tax in Spain – Should you pass your property on to your children or sell it to them?

Venture capital firms

Another method increasingly used by the wealthy seems to be setting up and putting money in venture capital or private equity firms.

According to Spain’s National Securities Market Commission, the creation of venture capital firms has grown by 38 percent since the government first announced the millionaire’s tax.

Siro Barro, partner in charge of tax law at Escalona de Fuentes, told El Economista that setting up venture capital firms are appealing because 60 percent of the investment made by creating a fund or equity can be exempt from both forms of tax in certain circumstances.

Tax experts expect the trend of creating and investing by the wealthiest taxpayers into private equity entities to continue to rise as long as the solidarity tax continues to exist, as with the donations loophole.

With the government yet to outline when this supposedly temporary tax will be scrapped (if at all), it seems these sorts of tricks, whether through donation or venture capital investment, are here to say.

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